Extradition: Mr Manzarpour

Earl Attlee: asked Her Majesty's Government:
	For how long and for what reasons Mr Ali Manzarpour, a British-Iranian dual national, has been held in a Polish prison in connection with extradition proceedings to the United States.

Lord Triesman: My Lords, Mr Ali Manzarpour was arrested in Poland on 17 February 2005 under a US-issued international arrest warrant requesting his extradition to the US on charges that he attempted to export a biplane from the United States to Iran via the UK illegally and other items from the US to Iran via Austria illegally.

Earl Attlee: My Lords, I thank the Minister for that comprehensive reply. Am I correct in my understanding that Mr Manzarpour is not a US citizen and that he has never been to the United States? Does the Minister believe that Mr Manzarpour has contravened any UK, EU or Polish law?

Lord Triesman: My Lords, I can confirm that Mr Manzarpour is not a United States citizen. I do not know whether he has ever visited the United States, so I am not in a position to answer that. With regard to the exports, he had applied to the United Kingdom authorities for a licence to export a light aircraft to Iran, and it was issued on 26 May 2004. The application was circulated for advice to the FCO and to the MoD, as normal, and was considered against published criteria. That is the position, as we understand it. We believe that that is the position in European law, although I understand that some lawyers who are expert in European law may have a different view. The United States believes that there is a founded case. I cannot answer for Polish law, because the case is before Poland's courts at the moment.

Lord Goodhart: My Lords, is this not an example of the US Government's aggressive use of the powers to obtain extradition and of the submission by too many countries—including, in other cases, our own—to those excessive demands?

Lord Triesman: My Lords, the United States has a straightforward ban on exports to Iran, which might be regarded as excessive in the House or elsewhere, but it is at least clear. It is going no further in this case, so far as I can tell, but it is putting these matters into its extradition case in the Polish courts. It is an open-court procedure. The whole argument for and against will be heard and has been heard thus far in the Polish courts.

Lord Waddington: My Lords, is it not correct that, in exporting the goods to Iran from Britain, Mr Manzarpour broke no British law and, if he had remained in Britain, there would have been no question of his being extradited to the United States? If that be correct, why are we not protesting vigorously to the American authorities at their attempt to have Mr Manzarpour sent to America from Poland to stand trial for acts that took place in Britain and that were not contrary to our law?

Lord Triesman: My Lords, I hoped that I had expressed the view in an earlier answer that Mr Manzarpour had gone through the processes and had obtained the permits that he needed lawfully in the United Kingdom. At least one of the items—the biplane—was sourced from the United States. It takes the view that that was in contravention of its law and that is the basis on which it sought the international warrant. I am clear in my own mind that the United States has a right to do so under its law, and it is a matter for the Polish authorities to consider whether they have to comply with the request for extradition.

Lord Howe of Aberavon: My Lords, is it not the case that earlier this week the Polish court of appeal quashed the conviction—in doing so, it stated that the conviction was groundless and unacceptable—and that the case is going for retrial? Is it not also the case that Mr Manzarpour has spent more than 12 months in a Polish gaol and has been refused bail even in the present circumstances? Should not the Secretary of State take up the case, as a matter of urgency, with his Polish and American counterparts?

Lord Triesman: My Lords, the appeal court ruled that the case should be sent back to a regional court to be considered again under a new judge. We are monitoring that situation closely and have made clear our continuing interest. It does not appear to me to be uncommon that, in general, cases take a long time to go through the courts in Poland. The facts as the noble and learned Lord has put them are right: for just over 12 months Mr Manzarpour has been in custody and without bail. I understand the proposition that is made. We are taking a close and active interest in the case, and we are looking after the rights of Mr Manzarpour as well as we can.

Lord Howell of Guildford: My Lords, over and above that, as the case obviously has political as well as judicial implications, are not my noble friend Lord Waddington and my noble and learned friend Lord Howe entirely right that we should be raising the wider aspects with the United States authorities? Can the Minister assure the House that we are in discussions with the United States about the wider implications, aside from the judicial processes? As the issue is basically about US sanctions on technology to Iran, will the Minister accept a slightly wider question and tell us whether the new UN Security Council proposal—not a resolution—to warn Tehran about its civil nuclear programme could lead to further sanctions, including changes in our own law and the tightening generally of sanctions on Iran?

Lord Triesman: My Lords, in general—not in this particular case—issues concerning the transfers of technology and when they do or do not comply with United Nations regulations are discussed regularly with the United States. I do not intend to speculate in the House today about whether there will be further sanctions. We are not at that point. We want a discussion in the Security Council about Iran and its current nuclear programme, a matter on which we have exchanged views in the House frequently, and I do not think that it would be appropriate to make those discussions more difficult by speculating on whether sanctions will be the result of them.

Lord Richard: My Lords—

Lord Rooker: My Lords, we must move on. We are well into the eighth minute.

Local Government: Household Waste

Baroness Knight of Collingtree: asked Her Majesty's Government:
	Whether they will introduce a statutory obligation on local authorities to collect household waste at least once a week.

Lord Bach: My Lords, the Government have not identified a need and therefore have no plans to introduce a statutory obligation on local authorities to collect household waste at least once a week.

Baroness Knight of Collingtree: My Lords, does the Minister agree that it is very unfair that some people have their refuse collected only once every two weeks while others have such a collection every week, even though both pay exactly the same pro rata? Is he aware that, as summer approaches, there is a growing dread of a repeat of last year when, in hot weather, uncollected rubbish led to the presence of maggots, smells, flies and rats? Will the Government now accept the World Health Organisation's judgment that, on health grounds, all household rubbish should be collected once a week?

Lord Bach: My Lords, the Environmental Protection Act 1990 requires local government to collect free of charge but does not specify how those collections should occur. That is appropriate, as elected local government should have the right to decide how and when to collect under the general heading of the 1990 Act.
	Some local authorities are changing their habits, to an extent, by introducing alternate weekly collections because those with extensive recyclable material collection discovered that the amount of residual waste that they now collect does not warrant weekly collection. To capitalise on that reduced need and make significant savings in waste management costs, some local authorities have adopted alternate weekly collections. Our Department of Health has confirmed that there is no health risk or loss of amenity, if the waste is properly handled.

Lord Dubs: My Lords, does my noble friend agree that every local authority ought either to provide accessible facilities for recycling or have a recycling collection?

Lord Bach: Yes, my Lords, we agree. In fact, our record on recycling performance by local government is a great success story. My noble friend will be interested to know that 8 per cent of household waste was recycled in 1998–99; that figure is now over 25 per cent.

Baroness Hanham: My Lords, I would like to draw the House's attention to today being the 40th anniversary of my noble friend Lady Knight being in Parliament. We would all want to congratulate her on that.
	I also declare an interest as a member of a local authority, which does a twice-weekly collection with twice-weekly recycling. What pressure and extra efforts are being applied to ensure that industry is capable of dealing with recyclable products, so that an increase in recycling does not just mean the dumping of those products all over the country?

Lord Bach: My Lords, we on this side congratulate the noble Baroness, Lady Knight, on her anniversary and the council of the noble Baroness, Lady Hanham, on that policy. I would also congratulate any other authority that decided to do something different for its own reasons. Within what we want to do, it is important to ensure that businesses too are in the business of recycling as a matter of course. The noble Baroness, Lady Hanham, will know that we have discussed repackaging, for example, in the House on a number of occasions.

Baroness Billingham: My Lords, I draw my noble friend's attention to the London Borough of Camden, where I live. I consider myself extremely fortunate because it has the most outstanding record not only on collection but on all the ways in which recycling can now be done. Is that a model that the Minister would now wish local authorities to follow? Camden's recycling is now not just of household waste but of garden waste and all forms of refuse coming out of our homes.

Baroness Maddock: My Lords—

Lord Bach: My Lords, let me congratulate Camden council in turn. If we had long enough, I am sure that we could go right round the country. Camden's record is outstanding, particularly in the way in which it emphasises the collection of recycling and composting material, as my noble friend said. Other local authorities would do well to follow its advice.

Baroness Maddock: My Lords, I apologise to the House for rising a little too early. The Minister touched on packaging. Does he not agree that a large proportion of household waste is packaging? Each time we buy something, we get a lot of unnecessary packaging. What measures are the Government taking to deal with that increasingly difficult problem?

Lord Bach: My Lords, packaging is a big question. We have discussed a directive about it in the House, and the Government are encouraging businesses by setting targets for the kind of packaging that they should produce. But it is also down to consumers: for example, if they buy loose fruit or other items that are not heavily packaged, that will encourage businesses not to use so much packaging and will be environmentally friendly as a consequence.

The Countess of Mar: My Lords, should people not go to their local councillors about this? Is it not a local authority responsibility? Local councillors are, after all, democratically elected to represent people regarding their bin collections, among other things.

Lord Bach: My Lords, the noble Countess has just said what I have already tried to say a couple of times. It is a matter for local authorities. I am sure that some citizens will go to their local authorities and make their views known, and some will be able to make their views known at the ballot box in May.

Baroness Gardner of Parkes: My Lords, it is a fact that there is wide variation. In Oxfordshire, my waste is collected only once every two weeks, yet my council tax there is much higher than it is in Westminster, which collects twice a week. The Minister says that people should go to their local council, but my noble friend Lady Knight talked about health issues, and for people whose babies have disposable nappies two weeks is a very long time. Where does one go to complain on health grounds?

Lord Bach: My Lords, I have enough problems as it is in the farming and food fields. I do not want to take on myself, unless I have to, the problems that may arise in some Oxfordshire district councils.

Lord Marsh: My Lords—

Lord Rooker: I am sorry, my Lords, we are in the 16th minute.

Regional Assemblies

Lord Waddington: asked Her Majesty's Government:
	What powers and responsibilities they have transferred to the unelected regional assemblies since the rejection of regional government in the north-east referendum.

Lord Bassam of Brighton: My Lords, the Government have announced their intention to accept the recommendations in the Barker review on housing supply that regional housing boards be merged with regional planning bodies and that the merged role be undertaken by the regional assemblies. This transfer will take effect later this year.

Lord Waddington: My Lords, I thank the noble Lord for his reply. Can the Government really justify making unelected assemblies regional planning bodies, giving them other powers and public money, when the people of the north-east have rejected the idea of an elected regional assembly and the Government have abandoned plans to introduce elected assemblies anywhere else? What right have the Government to throw taxpayers' money at bodies that are accountable to no one, have no mandate and no legitimacy whatever?

Lord Bassam of Brighton: Well, my Lords, I find questions of legitimacy raised by a noble Lord somewhat puzzling. The noble Lord ought to reflect a bit more on what he has said. Approximately 70 per cent of the members of regional assemblies are elected councillors. As I understand it, some 215 assembly members are Conservative, and Conservatives dominate four of the regional assembly bodies. As recently as November 2004, a lady called Sue Sida-Lockett, the Conservative chair of the East of England Regional Assembly, said:
	"Despite the north-east vote, there will still be a requirement for effective regional planning functions, provision of democratic mandate for the regions and effective scrutiny of other regional bodies—a role in which the assembly and other voluntary chambers have shown themselves to be extremely competent".
	I suggest that the noble Lord listens to his colleagues who are involved in regional assemblies.

Baroness Scott of Needham Market: My Lords, can the noble Lord say why, given the roles and responsibilities of the regional assemblies, they are not subject to the Freedom of Information Act 2000?

Lord Bassam of Brighton: My Lords, I was not aware that regional assemblies were not subject to the Freedom of Information Act; I thought that they operated within the various codes of conduct that applied to those who work in local government. It is an important issue, and I am sure that, as a matter of best practice, most regional assemblies would follow what is commonly accepted as the protocols and codes for FoI.

Lord Soley: My Lords, does my noble friend agree that the more we devolve power, whether on emptying dustbins, on building houses or on other things, the better? It would be nice if regional government had some powers. I encourage people to support that in the long run, but I accept that it is not supported right now. The tendency to centralise power, which was mentioned in the previous Question as well, is a serious mistake.

Lord Willoughby de Broke: My Lords—

Lord Bassam of Brighton: My Lords, perhaps it is the practice now to answer a number of questions at once. I entirely agree with the noble Lord, Lord Soley. A system of devolved powers to regional bodies is sensible. That is exactly why we set up the RDAs and the regional assemblies, which have been working well. I encourage those who believe in devolving power away from the centre to further encourage the effectiveness of those assemblies. From my experience in local government, I think that they are doing a very good job.

Baroness Hanham: My Lords, is not further regionalisation by stealth coming about as a result of the Miliband review of structures? What discussions have taken place with local authority members—not officers—on the restructuring of local government, which is now being undertaken under the Miliband flag?

Lord Bassam of Brighton: My Lords, as I understand it, discussions about local government structure have been going on for some time, and they will no doubt continue. The Miliband review, in so far as unitary local government is concerned, seems to have provoked a lot of interest among local authorities. I am sure that noble Lords are following that debate with great interest. However, these matters are best discussed by central and local government on a regular basis.

Lord Clark of Windermere: My Lords, I, too, was surprised that the regional assemblies were not subject to the Freedom of Information Act, because it was the will of both Houses that the Act should apply as widely as possible. Will the Minister consider writing to the regional assemblies asking whether they will make themselves open to freedom of information applications?

Lord Bassam of Brighton: My Lords, that is a very good suggestion, which I shall take back to my colleagues in the ODPM.

Lord Willoughby de Broke: My Lords, I apologise for jumping the gun earlier. Will the Minister confirm that the English regional assemblies mirror exactly the EU's plans for a Europe of the regions? I think that they do, but I would like it confirmed. Further, do any EU observers sit in any of the English regional assemblies?

Lord Bassam of Brighton: My Lords, I do not think that the regional assemblies would see themselves in the way that the noble Lord described. However, the noble Lord made an interesting point about membership. I understand that the East Midlands' six MEPs take an interest in the East Midlands Regional Assembly, but they are not full members of it. That cross-fertilisation is probably of value in the east Midlands. I do not know whether it is copied elsewhere.

Lord Elton: My Lords, I am not sure that the Minister's answer to the question of my noble friend Lady Hanham came out quite as he meant. Her question was about consultation specifically with members, not officials. The Minister did not use that word. Will he enlighten us?

Lord Bassam of Brighton: My Lords, I obviously meant what I said.

Noble Lords: Oh!

Lord Bassam of Brighton: Well, my Lords, one tries to mean what one says. I understand that discussions take place continuously between central and local government. Moreover, meetings of the Central and Local Government Information Partnership take place fairly regularly. I have no doubt that those discussions will continue in that form as in many others.

Iraq: Federal Structure

The Earl of Dundee: asked Her Majesty's Government:
	What is their response to the proposal for a federal structure in Iraq to assist with stability and the pursuit of parliamentary democracy.

Lord Triesman: My Lords, the new Iraqi constitution commits Iraq to a federal structure which recognises the regional nature of Iraq. The detailed implementation of the constitution's provisions will be for the Iraqi people to agree. We will continue to help in the creation of a united, federal and pluralist Iraq in which all citizens can benefit from security, prosperity and fundamental freedoms.

The Earl of Dundee: My Lords, I thank the Minister for his reply. Does he accept that within a federal system different groups in Iraq would work together much better than they do now? Does he also agree that co-operation between those groups would be further assisted by United Nations or international supervision of their oil revenues, as used to be done through the pre-1958 Iraq Development Board?

Lord Triesman: My Lords, it would be beneficial if the different groups co-operated to a greater extent. All minority groups will have to play a key part in deciding the details of the federal make-up of Iraq through the Council of Representatives and do so with a sense of great responsibility. We have spoken to groups in Iraq which, broadly speaking, accept that that is true. The United Nations' role in Iraq is clearly set out in UNSCR 1546 and UNSCR 1637, including assisting in the co-ordination of donor inputs into Iraq's development. The UN and other international institutions, such as the World Bank and the IMF, continue to play a crucial role in ensuring that there is a level playing field for all Iraqis through the relationship with the Government.
	Those two UN Security Council resolutions provide the foundations of a relationship and offer assistance to all Iraqis to effect Iraq's economic rehabilitation. Therefore the machinery is in place to achieve the level playing field that was historically achieved by a different route.

Baroness Trumpington: My Lords, is the Minister aware that this week I received a travel brochure, including plans for a seven- or 10-day visit to Iran, among other countries? Are the Government in favour of parties of British nationals visiting Iran at the moment, particularly women in European dress?

Lord Triesman: My Lords, I have not this morning read the Foreign Office's website on travel in Iran, although I looked at it a couple of days ago. There are plainly visits that occasion no trouble to those who make them. There are visits that are now more problematic. The only good advice that I can give your Lordships' House is to see what the position is today and in the immediate future on that website, because I appreciate that there can be significant difficulties of the kind that the noble Baroness raised.

Baroness Uddin: My Lords, does my noble friend accept that the aspiration of the alliances of achieving a federal structure in Iraq is far from the reality for the people of Iraq, given the agreed or otherwise state of civil war in Iraq? Does he agree that the UK's stand must be that we never again abandon Iraq in the way that we did earlier in the century, making possible the rise of someone like Saddam Hussein?

Lord Triesman: My Lords, there is no intention on the part of Her Majesty's Government to abandon Iraq until the job to which we are committed is seen through. There is no doubt that the security situation is volatile, and a crucial step in providing greater security is the formation, as soon as possible, of a lasting government in which people can have confidence and which will draw together the different federal groups. I see civil war as in no sense inevitable. The trends of elections, the votes and the determination of the vast majority of Iraqi people to have a decent, civilised society will, in the final analysis, impede any prospect of civil war becoming the general state of affairs.

Lord Wallace of Saltaire: My Lords, in view of reports from Baghdad and Washington in the past two days that the White House has told the current Iraqi Government that it wants them to change the Prime Minister, will the Minister reassure us that the British Government retain some influence over political and constitutional developments in Iraq and tell us through what channels those influences are exerted?

Lord Triesman: My Lords, I, too, as ever, have been entertained by the various accounts in the newspapers. I understand that the United States has made some remarks of that kind; we take the view that it is for the Iraqi people, as a sovereign people, through the institutions that they have voted into power, to come to a determination of these matters on their own and in their own interests.

Lord Richard: My Lords, I observe that there is two minutes to go to the end of the Question. Will the Government urge the newly emerging Government in Iraq to scrutinise carefully their extradition arrangements with the United States of America, so that they might in future be able to avoid the sort of problems that Mr Ali Manzarpour is suffering from at the moment?

Lord Triesman: My Lords, I am sure that we would want to see all the arrangements handled properly and under proper international law, so that international arrest warrants are issued only when they should be issued and operated on only when they should be operated on. I shall ensure that that is in the increasingly long list of things on which we seek some agreement.

Lord Howell of Guildford: My Lords, further to the question of the noble Lord, Lord Wallace of Saltaire, I must say that we have read that United States diplomats are pressing the Iraqis to adopt the new constitution. I think that today is the deadline for agreeing to it. Can the Minister assure us that UK diplomats are also playing a full part in helping the Iraqi people with their advice? Would he not agree that our advice from the United Kingdom might be that the federal element in the new constitution needs to be very light and careful, otherwise it will lead straightaway to the division of the Sunni, Shia and Kurd parts of Iraq into separate areas, with the prospect of endless instability and civil war? We learnt that from bitter experience, and perhaps our experience might be more closely listened to by our American allies.

Lord Triesman: My Lords, we play a full part in trying to tender advice, respecting the emerging sovereignty of the Iraqi people. However, I totally take the point that we must deal with the issue of federalism in a way that does not lead to greater conflict. The emerging conflicts between the different peoples that formed Iraq even before the war were already a serious issue. How to resolve those issues through a constitution that will blend together the elements without being over-prescriptive is a decision for the Iraqi people. But our advice to ensure that we do not stimulate conflict, rather than trying to find the mechanisms that will avoid it, is essential advice.

Royal Assent

Lord Brabazon of Tara: My Lords, I have to notify the House, in accordance with the Royal Assent Act 1967, that the Queen has signified her Royal Assent to the following Acts:
	Appropriation Act 2006,
	Council Tax (New Valuation Lists for England) Act 2006,
	Merchant Shipping (Pollution) Act 2006,
	Criminal Defence Service Act 2006,
	National Insurance Contributions Act 2006,
	Terrorism Act 2006,
	London Olympic Games and Paralympic Games Act 2006,
	Immigration, Asylum and Nationality Act 2006,
	Consumer Credit Act 2006,
	Identity Cards Act 2006,
	Natural Environment and Rural Communities Act 2006.

Business of the House: Debates Today

Lord Rooker: My Lords, I beg to move the Motion standing in the name of my noble friend Lady Amos on the Order Paper.
	Moved, That the debate on the Motion in the name of the Lord Trefgarne set down for today shall be limited to two hours and that in the name of the Lord King of Bridgwater to two and a half hours.—(Lord Rooker.)

On Question, Motion agreed to.

Planning Reform (Northern Ireland) Order 2006

Fire and Rescue Services (Northern Ireland) Order 2006

Terrorism Act 2000 (Revised Code of Practice for the Identification of Persons by Police Officers) (Northern Ireland) Order 2006

Local Government (Boundaries) (Northern Ireland) Order 2006

Lord Rooker: My Lords, I beg to move en bloc the four Motions standing in the name of my noble friend Lady Amos on the Order Paper.
	Moved, That the draft orders be referred to a Grand Committee.—(Lord Rooker.)

On Question, Motion agreed to.

National Lottery Bill

Lord Davies of Oldham: My Lords, I beg to move the Motion standing in my name on the Order Paper.
	Moved, That the amendments for the Report stage be marshalled and considered in the following order— Clauses 1 to 6 Schedule 1 Clauses 7 to 13 Schedule 2 Clauses 14 to 20 Schedule 3 Clauses 21 to 23.—(Lord Davies of Oldham.)

On Question, Motion agreed to.

Water Supplies

Baroness Byford: rose to call attention to water supplies in the United Kingdom; and to move for Papers.
	My Lords, I speak on behalf of my noble friend Lord Trefgarne.
	The rain figures over the past 18 months have been alarming. In the past two winters, rainfall across England and Wales has been below 90 per cent of the long-term average. The areas served by Yorkshire, Southern, Anglia and Severn Trent received only 51 per cent of their normal deposits over December and January.
	Also alarming, however, are the figures for leakages. Here in London over 30 per cent of the water mains are more than 150 years old. They were installed over a fairly short period, and built to last. It is time they were renewed, and in my opinion it is not reasonable to expect the current generation of water recipients to pay the full cost. I wonder what discussions the Government have had with the water companies over this matter, or whether, as has been the practice in the past, the water companies themselves are due to bear the full cost, which is then passed on to recipients of water.
	Were the Government to give up their proposed spending on identity cards and various other national databases, which they seem to hold so dear, there would clearly be funds to replace our current system of elderly water pipes. Burst water mains in London are possibly more frequent and inconvenient than in most other places. As we have all experienced on many occasions when we are driving to and fro, there are invariably roads that are taken up and repairs being made. A proper replacement programme should start in London and then perhaps move, water region by water region, according to the leakage priority. I would be grateful if the Minister would give us his thoughts on that important issue.
	I have read various speeches and looked at announcements and analysis concerning the water problem. They have one thing in common: a sticking-plaster approach. The gradual reduction of water pressure may reduce leakage rates, but it will affect water flows within buildings. How many of us have been slightly scalded by our showers, only to find that the water pressure has been reduced by perhaps a burst water main nearby? How much will be spent on installing pumps to boost water flow rates in office blocks, high-rise buildings, schools and hospitals? Has anyone calculated the extra cost of maintaining those pumps?
	Several water companies are bringing in a ban on car cleaning. I wonder whether the Government fear that might cut across the legal requirement to keep one's vehicle sufficiently clean and that the visibility, particularly of the number plates, is not impaired. Will the Minister reflect on that?
	Water companies have obviously tried to address this issue themselves. The whole question of water metering was debated fully when we took the Water Act through this House a couple of years ago. I know there are some households that fear it, and it is important that we ensure that families, particularly those on low incomes, will not be jeopardised. What consideration has been given to those who will be forced to have water meters? What arrangements will be made for some help regarding the amount of water they use? If you have large families—and often those on low incomes have one or two more children than some others might—there is obviously greater pressure on the amount of water you use.
	Drought orders and drought permits restrict access towards supplies. During our discussions of the then Water Bill it was made clear that many rivers were even affected by unsustainable levels of extraction. We were lobbied by users, particularly by the horticultural sector—especially the watercress growers—who were very threatened by the new legislation. Hitherto they had not needed a licence, but they are now likely to be refused one because the businesses that had to be licensed under the previous law were taking all that rivers could bear. The Minister will know only too well that vast areas of England are totally reliant for the production of their crops and for food supply on a steady supply of water. That is particularly true of potatoes, carrots and other horticultural products. I could name several, but I need not because the Minister is nodding and appreciates the difficulties they face.
	Who will decide which current licence holders have their business restricted—or even ruined—by a drought order? Will this be a matter for the courts, or is there a mechanism enshrined in direction or guidance that will arbitrate? How much better it would be for the Government to accept that it is unfair to place the whole burden of pipe renewal on current water rate payers, and that funds should be reallocated to help them. Does such a decision lie with the Environment Agency alone, or do the Government have overall responsibility? Who, at the end of the day, will take responsibility for the whole water supply?
	I know that when we debated the then Water Bill in Committee there was unease about the Minister taking responsibility. Under the pressures we face now, it needs to be clarified whether the Environment Agency or the Minister himself is responsible. We have been assured by the Minister that sufficient water is available to serve all the new housing projects planned for the south-east. We need to seek that reassurance today. Given the likely continuing climate change effect, the problem will only worsen in the coming years. This is where Defra and the ODPM find themselves in different camps. The house-building plans of the ODPM give most people a feeling akin to the old saying, "Somebody has just walked over my grave". We do not need to stop and think hard about it: we know that it is a ridiculous plan to increase water consumption in an area of acute water shortage without adequate plans to ensure that the water supply will be maintained.
	The Environment Agency stated that the drought is most severe in Kent and Sussex. The Commons Environmental Audit Committee judged that,
	"areas of the South East are already being supplied water by an unacceptable and unsustainable abstraction regime in both winter and summer months".
	It did not qualify that statement with any reference to drought; it considered the situation to be unacceptable in all circumstances. Defra, on the other hand, continually claims observance of scientific advice on all matters for which it is responsible. Does the continuation of house plans in the south-east indicate that Defra and scientific observance counts for much less than the obsessions of the ODPM? Or is responsibility for the environment a moveable feast? Others have said before—and I repeat—that it is a question not just of the amount of rain that we are not having, but of the pressure on the very water table itself, as well as on the river flows, and of the ecological impact. The forthcoming water framework directive, which we have to enforce, puts extra responsibility on us, as a country, to manage our river flows and ecological impact, and to have regard for our wildlife.
	The February 2006 Postnote, Balancing Water Supply and the Environment, issued by the Parliamentary Office of Science and Technology as its 259th release, makes this particular point:
	"Public water supply . . . accounts for 45 per cent of all abstraction".
	Postnote goes on to say that the security of the public water supply is measured as the difference between water availability for the water supply and the water demand. It says that proposals for increasing water supply security and meeting projections of increased demand already include reservoirs, desalination plants and compulsory water metering in specific areas. The reductions in current supply levels to protect the environment could result in greater justification for these options.
	About meeting the environment's water needs, the document goes on to say:
	"The only justification for not meeting protection requirements is an imperative reason of overriding public interest. For sites hosting a priority habitat or species, the only public interest considerations",
	that can overtake that are obviously,
	"human health or public safety".
	Again, in referring to the impacts, Postnote states: "In applying these reductions", the Environment Agency,
	"is duty-bound to ensure that PWS is not destabilised. However, there is no definition of what constitutes a 'stable supply'"—
	perhaps the Minister can tell us in his winding up—and what is,
	"an acceptable environmental cost for its maintenance".
	Postnote continues:
	"In line with government advice, the",
	Environment Agency,
	"is initially proposing to collect £85 million through the abstraction charging system to fund licence revocations at Natura 2000 sites where a real and current environmental risk can be identified".
	Will the Minister also enlarge on that in his reply?
	The whole question of water supply is key to all of us. We cannot live without a steady water supply. I have tried to refer to the effect that it has on us as individual consumers and householders, on those who grow our crops and our land, and on future food security supply. I have also tried to reflect on our new and ever increasing responsibility to the environment and wildlife. I am sorry that my noble friend was not able to be here to move this Motion, but it gives me great pleasure so to do. I beg to move for Papers.

Lord St John of Bletso: My Lords, I am grateful to the noble Baroness, Lady Byford, as well as the noble Lord, Lord Trefgarne, for introducing this increasingly important issue to the attention of your Lordships' House. It is appropriate that we should discuss water supplies today because so many reservoirs are standing at perilously low levels across the country. The subject has moved to the top of the public agenda and it will remain there, no doubt, through the summer months that lie ahead.
	I would like to focus my remarks on two specific aspects: first, the extraordinary wastage of water through leakage, which has already been highlighted by the noble Baroness, Lady Byford, and, secondly, what measures are being taken to limit demand, both today and in areas of future development. There is no doubting the seriousness of the situation, not only in the United Kingdom, but around the world. The global statistics of water supply make stark reading. Even though two-thirds of the Earth's surface is made up of water—which can easily, but at high cost, be turned into drinking water with the help of desalination plants—only 1 per cent of the world's water is drinkable. It is no wonder that the United Nations Environment Programme ranks water shortage alongside global warming as the two great challenges facing the world during this millennium.
	I found the article in the Sunday Times two weeks ago on waste management entitled When the Rivers Run Dry What Happens When Our Water Runs Out? particularly alarming. As we know, 70 per cent of the water supplies in south-east England come from underground sources. The levels of these sources are well below average after two consecutive winters of below average rainfall—the driest period since 1933. The problem is not just in the south-east of England. The spring that has been supplying my house in south Wales for centuries dried up at the end of last summer. While it is now flowing again, I have no doubt that the problem will recur. In Britain, our daily personal consumption—drinking, cooking, washing and flushing—is about 150 litres per person. However, I was alarmed to read how much water is consumed in the growth of our crops. Nobody can be complacent.
	Against this background of diminishing supplies and the fact that three water companies have sought legal powers to ban non-essential use in south-east England, current levels of water leakage are alarming. In England and Wales alone, every day more than 3.5 billion litres of water are lost through various leaks in the system. It is not surprising that Ofwat has warned several water companies that they must take action to avoid future problems. The situation is bad, but it has been worse. In the year until March 2005, leakage stood at 3.6 billion litres a day. That has been marginally reduced by continuing investment in water resources and cuts in leakage from the mains.
	Thames Water, the country's largest supplier, has had some success in addressing the problem of leakages. The company now employs more than 300 two-man teams working to find and fix leaks across the region, making more than 700,000 repairs every year. That maintenance system is coupled with an ambitious programme to replace London's Victorian water mains, half of which are more than 100 years old. Such measures have reduced leakage in the Thames region by approximately 30 million litres a day. Ofwat has rightly stressed the need for similar measures to be introduced by other water companies, notably Southern Water, Dwr Cymru and Severn Trent Water.
	I am no expert on the subject, but I would be interested to learn what new technologies are being developed to manage and monitor water leakages more effectively. Certainly in the telecommunications industry, where I have more expertise, within minutes of a problem developing in a telephone network the authorities are able to isolate and identify it easily and swiftly. Perhaps the Minister would outline what measures are being taken to investigate whether similar technology can be used to manage the country's water supplies.
	It has also become clear that new measures are required to control the demand for water in the United Kingdom, particularly in specific areas in the south-east such as Folkestone and Dover, which are threatened by drought. Officials in those areas have warned that extreme measures may have to be introduced. When the noble Baroness, Lady Young of Old Scone, the chief executive of the Environment Agency, warns that our water supplies are at risk, we should recognise the seriousness of the situation.
	What can be done to limit demand? The solution may lie in a successful campaign to change the habits of the nation. That may be easier said than done. However, it is estimated that if everyone in England and Wales simply turned off the tap while brushing their teeth in the morning, enough water could be saved to supply 600,000 homes. I dare say that the perennial finger-wagging and the idle threats will not make much difference, but a dynamic and creative campaign to educate the public on the seriousness of the situation, and the relative simplicity of at least part of the problem, could prove highly successful. Perhaps the Minister will confirm whether such public information programmes will be implemented.
	The noble Baroness, Lady Young, also called for compulsory metering, based on the sound principle that people will start to take notice only when they feel the impact on their wallets. The introduction of meters to ensure that people pay for the water that they use—rather than rates—will surely assist the process of controlling the demand on water supplies. At present, only 28 per cent of homes have water meters, although I understand that the Government have a target to reach 75 per cent within 20 years.
	Folkestone and Dover Water Services has already been successful in its application for "area of water scarcity" status, meaning it can accelerate switching its household customers to water meters. This programme is mainly voluntary, but the company may soon be able to charge all its customers according to how much water they use. The strategy will help match limited supplies to resources. This is surely the key to preserving adequate water supplies. Will the same status be granted to other water companies?
	The Environment Agency should also be commended on its work with water companies in developing water resource management plans, which look ahead 25 years and include projections of current and future demands. These plans are regularly updated to account for factors such as projections of household numbers and occupancy rates and the implications of climate change. It is particularly significant and valuable that these water resource management plans have become statutory under the Water Act 2003.
	The most severe challenges lie in the south-east. The high levels of housing growth—already mentioned by the noble Baroness, Lady Byford—envisaged in the region require careful planning to ensure that development does not proceed ahead of secure water supplies. New or enlarged reservoirs and pipeline transfers need to be developed, and it is important that the Environment Agency continues to work closely with the water companies and development agencies to ensure that sustainable solutions are achieved, both in the south-east and in other areas of the country where sustainable communities are planned.
	It should be stressed that the present challenge of controlling our demand for water does not lie only with this country's households. The responsibility also rests with industry, which accounts for almost a third of usage. Envirowise, a government-funded programme that advises companies on improving their resource efficiency, suggests that UK industry uses no less than three times more water than is necessary each year. According to Martin Gibson, the programme director of Envirowise, a business that implements an effective conservation technique can cut its annual water consumption by 30 per cent and enjoy substantial cost savings.
	Our water supplies will be protected and sustained by changing the habits of the public and of industry. The Government's challenge is to work with the various water companies and stakeholders to introduce regulations and campaigns that assist in this process.
	A World War II veteran once told me that there were two uses for water: for washing; and for making your whiskey go a bit further when times were hard. Such an approach would stand us all in good stead today.

Baroness Hanham: My Lords, I, too, thank the noble Lord, Lord Trefgarne, who is now in his place, for securing the debate and my noble friend Lady Byford for introducing it so ably.
	It is inevitable that to some extent we will all trudge across the same territory in today's debate, because clearly there are some subjects on which we all want to say much the same things. I would not have been tempted into this debate—I am not a great expert on water supply—if I had ever received any good answers about how the south-east in particular will manage the 250,000 extra homes to which both previous speakers referred.
	When we have had discussions in this Chamber on sustainable development and sustainable communities, it has been absolutely clear that the one thing that matters to those communities is the infrastructure that will support them. One of the most important aspects of the infrastructure is the supply of water. The inevitable question is: what plans are there to provide water to those 250,000 houses a year, with the prospect of 2.5 million being built over 10 years in the south-east alone? As we have already heard from the noble Lord, Lord St John, the south-east is currently a challenged area as regards water.
	When one asks where the water supply will come from, there is a dramatically enigmatic silence. The first time I asked that question of the noble Lord, Lord Rooker, there was a wave of the hand and a suggestion that, "That will all be taken care of". But we are not going to be able to wave our hands and say that it will all be taken care of. This House and the people in the south-east need reassurance that concrete proposals are in place for the extra water supply. There is not a good water supply at the moment, so how on earth will it be made available over the next five to 10 years to support the amount of new housing that is coming about?
	There must be an answer to that question. Someone must be having discussions, and, if not, why not? If the Environment Agency is having discussions with the water companies, that is fine, but why the secrecy? Why do we not know what is going to happen? If there are proposals for new reservoirs—I do not know whether there are—that will affect yet more land in the south-east. If there are proposals for transporting water in some way to the south from the northern parts of the country where there is a good water supply, we do not know about them. If the water companies are to continue to extract from boreholes, for example, or are to create new boreholes for water, where are the plans for that and what discussions have taken place?
	It is extremely disturbing that proposals for a £200 million desalination plant near Barking in east London have been stopped. Thames Water had said that the plant would play a key role in guaranteeing water supplies to customers during drought periods, but the extra tier of government that now covers London in the form of the Mayor concluded that the development was not in line with the sustainable management of water supply resources in London—if only there were some. The policy is to meet water supply needs in a sustainable manner through methods such as minimising the use of treated water and reducing leakage, but such an energy-intensive method of producing water as desalination was considered by the Mayor to be contrary to that objective.
	We can plug leaks as much as we like—and it would be a great relief if the leaks were plugged—but, in reality, the amount of water flowing out through leaks, dreadful though that is, will not sustain 250,000 extra houses in this country each year for the next 10 years. I do not know whether the Minister is aware of the quite extraordinary decision by the Mayor not to allow the desalination plant. If he is, has he, or have his officials, had an opportunity to discuss that decision with the Mayor, who, it seems to me, is becoming exceedingly eccentric? Have those discussions taken place and, if they have, is there any rational reason for the proposal having been stopped? We are not going to be able to extract from the rivers unless there is a great deal more rain than there has been or unless there is melting snow or whatever to put water into the rivers. We cannot continue that extraction. As my noble friend Lady Byford said, it has other implications for nature and for the general quality of water in the country.
	In the past two days, I have crossed territory with leaking water mains, and I am bound to say that I thought that I might as well stop and wash my car; there was quite enough water to do it. I might have caused a traffic jam, but I could easily have washed my car in the amount of water that was there. I would not have used—though I dare say that the water company would have lost—anything like the 564 litres of water that the very annoying advertisement on the radio—on Capital or Classic FM—keeps on reminding us of. It is about the man who delivers 564 litres of water to a household. The householder rightly says that he does not want it, and the man says, "You do, because that is what your hose has churned out for more than an hour". He goes on to say that a watering can takes only seven litres, although I do not know whether that is in an hour. The burden of the advertisement is irritating, but it shows that the water mains will be pushing out more than 564 litres an hour because of the pressure.
	I shall touch on a couple of other things that take me away from housing in the south-east, although that is the main burden of my comments. I hope that the Minister will give us some information about what is planned and what discussions are taking place. Most of all we need reassurance that the infrastructure—particularly of water—is being considered. I am afraid that there is a general feeling that it is not.
	Thames Water is about to lower the pressure of water to domestic properties. I have a trickle on my second floor at the moment, which is somewhat enhanced by a pump. If Thames Water reduces the pressure by anything more than a minimal amount, I will have no water on the first floor in my house. Such actions are guaranteed to drive householders to a fit of revolution. We must save water, but at the same time we must not allow water companies to do things that make life difficult. We can save water if we cannot get it out of the tap—that is plainly obvious—but certain actions will affect people in various areas disproportionately.
	Compulsory water metering is also coming to some areas. It has not yet appeared in our area, but there are concerns that, once water metering is widespread, water will begin to come into the same category as gas and electricity. Charging is done on the basis of rateable value at the moment, but when the water companies have compulsory water metering, it will end up being done as it is in the other utilities and suddenly there will be a shortage, and the costs will go sky high.
	The Minister might like to touch on the costing issue as well. All these elements—water, heating, gas and electricity—are now beginning to cost householders an enormous sum of money because of lack of supply, and will become a huge issue in the coming years. I know that the investment required in water is enormous. I do not know—perhaps I should—what compulsion there is on water authorities to ensure that they maintain their structures. The amount of water loss is enormous. I appreciate that the investment required is considerable, but if we are not to have an even greater disaster, some of the questions that I and previous speakers have asked need urgent answers.

Lord Lyell: My Lords, I thank my noble friend Lord Trefgarne for giving us the opportunity to discuss this incredibly important subject and my noble friend Lady Byford for opening our discussion with such a powerful speech. Your Lordships will be pleased to know that many of the points that came to my mind have already been made, especially in relation to supply, leakages, Ofwat and the various authorities that have responsibility either for watching what we do with water or for supplying it.
	I was very pleased that my noble friend referred in the Motion to water supplies in the United Kingdom. I have one or two points to stress to him and your Lordships about that later. All my life, I have been involved in farming, but I also have clear memories. I was too young—in fact, I was not in this country—to remember the great floods of 1947, but I recall that in 1953 there were enormous floods. They were caused not so much by rain, but by wind storms, which affected us in Scotland and others throughout the United Kingdom. Your Lordships may well remember that there were 200—or was it even 300?—fatalities in north, east and south-east England. In my schooldays, in 1954, the Thames flooded right up to the steps of Eton College. That was not in the flood season, spring; it was in autumn—in November. That was before the days of the Thames Barrier. I have no idea why it happened; it might have been to do with drainage, but there was especially heavy rainfall during November.
	I remember that, during my schooldays in Angus, the two years of 1955 and 1959 were incredibly dry. I have good reason to remember that because in that area, which I think is known to my noble friend Lord Astor and certainly to my noble friend Lord Glenarthur, there were springs that almost dried up, but they have come back. We have records going back for 250 years, but those years were the two driest that we have ever experienced. In east Scotland, 1975 and 1976 were two particularly dry years. Indeed, your Lordships may remember that the last time—as I recall—that we had standpipes in London and the south-east was in 1976. I am delighted that my noble friend Lady Shephard agrees, because Norfolk was even drier than parts of Angus.
	I wonder what cures there are. The noble Lord, Lord St John of Bletso, made an enormously powerful speech about industry. I have not been involved in industry but, as an agriculturalist, I know and am becoming increasingly conscious of how much water particular crops require. Vegetables and livestock require much more. I wonder whether there is a cure. We have heard several powerful speeches about repairing the infrastructure. The nearest authority to us is Thames Water. We have heard what it is attempting to do, especially to repair 100 year-old water infrastructure beneath the streets of London.
	We are also receiving increasingly helpful advice, using the happy word "efficiency", on saving water. Much of that is about turning off the tap while you brush your teeth, but it gives great pleasure to the younger children of the sons and daughters of your Lordships when they are told to bath only once a week or once a fortnight. They are dancing with joy about that. However, more constructive advice is available from water companies, Ofwat, and elsewhere. I am sure that we will get friendly advice from the Minister later.
	However, there is appears to be confusion about building. My noble friend Lady Hanham mentioned this. First, there is the question of supplies. I see that my noble friend Lord Astor of Hever has just joined us. He may want to speak later. I recall that there have been exceedingly serious floods in his area twice, if not three times, in the past five years. That has ongoing implications for householders and people living and working in that area. They are finding it difficult and very costly to obtain flood insurance for their houses, properties and businesses. So there is something of an imbalance.
	We have heard about supplies of water—not only domestic but to industry and agriculture. The noble Lord, Lord St John, pointed out the worldwide problem. The percentage of water that can be used for drinking in the United Kingdom is perhaps not too different. The water companies—indeed, the water industry—are also involved in many other aspects that add to the cost of finding, saving, preserving and looking after water; namely, the standards—that dreadful word—of purity. Your Lordships may remember the fierce, emotional and impassioned debates on putting fluoride into the water in the south-east of England. But I am very grateful for the efforts being made to upgrade the purity of water throughout England and Wales, let alone Scotland, and particularly in the Thames area.
	I hope that the Minister will be able to give us guidance on several fronts. I warned your Lordships that I was delighted that my noble friend's debate referred to water in the United Kingdom, because between 1984 and 1989, I had purported responsibility in Northern Ireland for what was called drainage. But I was not responsible for the alteration of that name during my time there to "water course management". It did not make much difference; we still had particularly serious flooding problems. The advice that I got—I doubt the Minister will be able to correct me when he gets better advice—was, "Oh, this is quite safe. It happens only once in 50 years, or twice in 100 years". I began to ask questions after we had particularly serious floods on the flatlands of County Londonderry. I was particularly aware of, and learnt a great deal about, drainage for forestry and agriculture there but, through drainage, we have undone, or corrected, perhaps 50, 100 or 200 years of what our ancestors used to call flood plains. These, too, have their part to play in preserving water.
	I wonder what can be done. No doubt the Minister and others will have quite a bit to say about water supplies and the grid. They will certainly have something to say about co-operation between the water companies. In the words of one trader, "Every little helps". Every single litre that can be saved is excellent. Perhaps, beyond my lifetime, a water grid might help. It might not help in the island of Ireland, but there is certainly quite enough water in Scotland—we like to use it—in the event of further extensions to the north. We know of the enormous success of the Kielder and another area—I think it is called Catcleugh—which I pass through three, four, five or even 10 times a year. It goes back to the 1930s and is part of the Kielder system. For each of the past three years, it has been adequately filled up. So there is water in the land mass of England. Perhaps the Minister will say that there will be a grid beyond the lifetimes of many of us, including those of the children who may not want to take baths at this moment.
	I am delighted that my noble friend Lord Trefgarne has secured the debate today, because I suspect that tomorrow and over the weekend he may require considerable supplies of water of the mineral variety and perhaps others.

Baroness Farrington of Ribbleton: My Lords, it may assist the House if I explain that the noble Baroness, Lady Shephard of Northwold, was put on the wrong speaking list in error. She will now speak as a full speaker on this list.

Baroness Shephard of Northwold: My Lords, I am extremely grateful to the Minister for that explanation. I am even more grateful, despite this inexplicable failure of communication between the Government Whips' Office and me, to be able to contribute to the debate. I congratulate my noble friend Lord Trefgarne on securing the debate, which is indeed timely and relevant, and my noble friend Lady Byford on so ably introducing it.
	At least 12 million homes and businesses in the south-east will also agree that the debate is extremely timely, because they face a hose-pipe ban and other restrictions from 1 April; namely, the day after tomorrow. I understand that householders in Oxford have been told that after that date they will not be able to use even a bucket of water to clean their cars, let alone a hose-pipe, so they, too, will think that our House is debating something that is very relevant to them.
	I come from East Anglia and, so far, we are not as badly affected by water use restrictions as are, for example, parts of Kent and Sussex, but we have some problems with water supply and abstraction in the south part of our region.
	In East Anglia, there is increasing concern that the plans of the Office of the Deputy Prime Minister for around half a million new homes for East Anglia by 2021 take scant regard of the implications for water supply. The view generally in East Anglia is that the Government preach concern for water conservation, on the one hand, but, on the other, announce plans for new settlements, apparently with no thought at all for water use.
	This paradox was highlighted by the ODPM Select Committee in its report of April 2003, which revealed that water companies had not been involved in discussions on housing targets for the south-east, a matter touched on by my noble friend. The Committee commented:
	"It is astounding that despite the clear need for an assessment of the environmental impacts of the proposals for the Growth Areas as a whole, nothing has been done to date by ODPM or DEFRA to address the issue".
	I understand that last July—I was not present—the Minister undertook to ensure that the Government examined the merits of a national water grid. He may be able to update the House on the progress of his undertaking in his remarks later. I am sure that his conclusions and whatever he has to say will be examined very closely in East Anglia. This is because the East of England Development Agency and the regional assembly have taken the sensible, but unusual, step of suspending their support for the regional plan during its examination in public until the Government can confirm that they will provide funding for the necessary infrastructure to support the additional half a million homes proposed by the ODPM. That infrastructure obviously includes water supplies and sewerage provision. To date, no such confirmation has been forthcoming.
	The Environment Agency, which has been closely involved in the drawing up of the plan—although not as a statutory consultee—has said that development of the region has to depend on the provision of new water resources. It gave this view in evidence to the House of Lords Science and Technology Committee on 28 February. That evidence is uncorrected as yet. I should point out, in the presence of the noble Earl, the chairman of the sub-committee, that the committee has, as yet, come to no conclusions.
	The regional assembly and the Environment Agency agree that full and proper infrastructure studies should be carried out of public health and water needs before the development takes place. I hope the Minister will be able to explain to the House that such studies are underway. The chairman of the regional assembly on 28 February—again I point out that this is uncorrected evidence—said:
	"We have some significant concerns about the undoubted increase in homes that we are being asked to build by the Government and the lack of infrastructure funding".
	She added:
	"It has not started to come, and we have some concerns that it may not happen in which case we shall . . . not feel able to support the increased housing".
	There is a very strong perception that the sustainable communities plan was launched without much thought for the provision of infrastructure. I am sure that the Minister will say—and this will be the case—that it is the task of the regional assemblies to undertake the necessary consultation. But many will feel—particularly with an issue as sensitive and as totally essential as water—that some thought should have been given to its provision before such dramatic announcements were made.
	The Institution of Civil Engineers shares this view. It produced a joint report with the DTI, Sustainable Water Management and Land Use Planning, published in February this year, and stated that if a sustainable water management strategy to support a planned development cannot be produced, the development should be reviewed. Where is the sustainable water management strategy for the half a million houses planned for the east of England? Since the sustainability of water in that region has to depend on inter-regional transfer, what will be the cost of that transfer, who will provide the money for such a plan and, indeed, how environmentally sensitive is such an energy-intensive transfer?
	There has been mention of a water grid. Everyone would recognise the present imbalance of water supplies across the country, but no one should think that would not come at a huge cost—not just financially, but via energy use and thus environmentally, too.
	My noble friend Lady Byford mentioned the importance of agriculture. It is another reason that people in East Anglia are concerned about the planning of water resources; water is vital to the region's agricultural economy. I know that the Minister understands that agriculture represents a higher percentage of that region's economy than for many other areas. Because of changes in the common agricultural policy and the Government's enthusiastic espousal of a new sugar regime—effectively phasing out sugar-beet production—farmers have increasingly turned to vegetable production and processing. That is an obvious and sensible market-oriented solution.
	Clearly, it is not just financially and economically but environmentally desirable to produce carrots, onions and salads near to their markets rather than importing them from, say, Spain. I know that the Minister strongly encourages our farmers in these enterprises, but it is self-evident that producing those crops requires irrigation. Water use for that purpose is steadily rising, year by year. While that needs to be done with great sensitivity for the environment—and in close co-operation with the Environment Agency—there is a clear need to plan the way that water is used for those purposes.
	The agriculture industry has put enormous amounts of time, energy and money into investing in reservoirs and equipment, but it is equally obvious that such investment and commitment to a market-oriented approach to agricultural production could be threatened if insufficient attention is paid to the long-term planning of water resources. So, what is the overall strategy and, rather importantly, can we rely on the estimates provided by water companies? The Environment Agency thinks not. In evidence produced for the House of Commons Environmental Audit Committee last November, it said that it believed the water companies had underestimated the level of housing growth for which they are planning water resources by 20 per cent. That is before we start to think about the implications of commercial and industrial growth.
	There is no shortage of ideas on the building requirements, water conservation, regulation, abstraction or recycling. Indeed, one interesting idea being revived from 30 years ago was described in the Eastern Daily Press of 27 March. That is for the establishment of a grid of reservoirs in the Wash, to draw from the rivers which flow into the Wash and feed into the sea. Perhaps the Minister can tell us a little about that scheme, if he knows anything about it.
	The Government face a situation which their predecessors did not. The implications of climate change are clearer now than they were 10 years ago. The rising demand for new housing comes in part from an accelerated sociological change within the past 10 years. Yet they are the Government of this time. It is their responsibility to plan for the future with the appropriate partners and to cope with that unprecedented situation by making changes to planning processes and the like, if necessary. I look forward to reassurance from the Minister that the process is underway. It is his watch.

Lord Trefgarne: My Lords, I rise only to offer my profound apologies to your Lordships for not being in my place when this debate began. My explanation is a mistake for which I alone was responsible and I apologise again to your Lordships. I thank everyone who has taken part in the debate so far—and, indeed, those who are to speak afterwards—but particularly my noble friend Lady Byford for rising to move the Motion on my behalf a little while ago. I am most grateful to the Minister for replying and to all of your Lordships who are taking part in the debate. I look forward to hearing the Minister's reply.

Baroness Miller of Chilthorne Domer: My Lords, I congratulate the noble Lord, Lord Trefgarne, on securing this debate. In doing so, he has had the same effect as I noticed I had when I last put down a Starred Question on the subject. Once the time comes for that question or debate to be taken, a certain amount of heavy rain seems to be induced where there has been none before. We are probably all grateful for that. I also congratulate the noble Baroness, Lady Byford, on introducing the debate on what is an incredibly important subject.
	There are many parallels with the recent debates in your Lordships' House on energy, in that there is no one solution. The Chartered Institution of Water and Environmental Management makes the very good point that building our way out of the problem with reservoirs or a national grid is much less practical and cost-effective than managing demand and leaks. Although we may start looking, out of necessity, into creating new reservoirs—it would be a foolish Government who excluded that possibility—they offer a very long-term solution that comes with its own high costs, not least in terms of human displacement. Given the long-term nature of that part of the solution, we need to look at more short-term solutions.
	I share the reservations of the noble Baroness, Lady Shephard of Northwold, about a national grid for water. I will not repeat them, but she is absolutely right to have so many reservations about energy use. Coming from the opposite end of the country, in the south-west, I believe that those areas from where it might be believed that water would be derived for the national grid might have a fair few comments. Water is becoming generally scarcer and we face drier winters and harder, shorter rains, even in areas such as the south-west. That was well illustrated from the Welsh perspective when the noble Lord, Lord St John of Bletso, said that a spring in his area of south Wales had dried up. As it is quite apparent that every area of the country faces having far less, and far less reliable, rainfall than it has been used to, I am not sure that a national grid will offer many solutions in any case.
	Therefore, we need to look in a far more focused way at demand management. One of my questions is: why wait for scarcity before acting to curb demand? That question came into our debates on the Water Act 2003, and I still fail to understand why the situation is so. It seems a strange way to deal with the problem, when we know that supplies are likely to diminish and that climate change means that we will be less able to rely on predictable weather patterns. Yet it still seems to be the case that water must actually be scarce—a drought situation, almost—before a water company may even apply for compulsory metering or before the Government take definite measures.
	Elliot Morley, the environment Minister, announced plans earlier this month to make water efficiency measures such as dual-flush lavatories and low-flow shower heads mandatory for new homes—surely, a necessary move. He said that the Government might introduce regulations so that owners of existing homes refitting a bathroom or a lavatory would have to introduce similar water-saving appliances. Why is that not compulsory? Why are the Government not making such regulations? If we accept that water is in short supply and that bathroom appliances and lavatories last for 10 to 20 years, surely the time to act is now, before water becomes scarce.
	There are many examples of very good practice. Every year the Environment Agency runs its annual Water Efficiency Awards, which I have twice been privileged to attend. Some of the good practice shown by industry and commerce at those awards could be further rolled out in encouraging similar businesses to adopt the measures we have seen.
	Noble Lords have mentioned the agri-sector as a big water user. It needs the water to produce the crops, but the projected increase in use—partly due to climate change, because drier summers mean more water will be needed—is some 2 per cent to 3 per cent a year. Over a decade that is about a third as much again.
	Does Defra have plans to encourage more on-farm reservoirs? If you take the train through France, it is very striking to see the number of on-farm bassins, as the French call them—or small reservoirs. There are dramatically more in France than there are here. The winter rains that run off can be captured for summer use. It is a very effective way of gaining water for irrigation and takes some of the pressure off groundwater. Abstraction is a possibility, but Southern Television, I think, did some underground filming down in the groundwater supply, showing where the levels were eight years ago and where they are now. They are still dropping, and it is quite impossible to envisage how those supplies will ever be replenished up to 100 per cent. It is a question of using every possible measure available.
	The Consumer Council for Water, one of the bodies set up by the Water Act 2003, is a strong voice for consumers. It is a very necessary body, because as water comes under pressure and we discuss moving towards compulsory metering, what about the vulnerable groups? There is still a slightly arcane system whereby the water companies create trusts that pay out for vulnerable groups such as those on income support, large families and those with chronic illnesses, who need to use large amounts of water.
	We may, over time, believe it is a good idea to move to compulsory metering because it will limit demand, but that is not a given. Some studies have shown that as soon as metering is introduced, it creates something of a drop in demand, which then rises again. Does the Minister believe that metering reduces demand overall or that educational and technological measures such as better appliances are more effective? As there may be moves towards compulsory metering, we need a very strong Consumer Council for Water, but I believe that the Government may have plans to combine it with a consumer council for other utilities. That would be an unhelpful move. Will the Minister say whether that is part of the Government's plans? We do not believe that it would be a good idea at all.
	One of the very surprising statistics that I discovered when researching for this debate concerned water use per head in the UK. My source was the Food and Agriculture Organisation. If we had a very high usage per head compared with other EU countries, we would know that there was lots of room for improvement and, in one sense, less room for worry. But the graph shows that, in water usage per head, the UK is slightly above Malta, Latvia, Estonia and Lithuania, below every other EU country and substantially below Germany, France, Greece, Hungary, Italy, Spain and Portugal. So there may not be that much room for improvement in water consumption by individuals.
	Water consumption by industry could be improved by measures such as water sharing. One industry's heavy use of water, resulting in grey water, could then be used by another, downstream industry. I do not have time to talk about this now, but the Environment Agency gives examples of this and of leakages, which many noble Lords have mentioned.
	The water framework directive offers unparalleled opportunities for every sphere of society, whether consumers, industry, commerce or planners, to take part in river basin planning, together with the statutory agencies such as the Environment Agency, and to come up with solutions not only for water saving but for water quality and everything to do with the hydrological cycle. I believe that those opportunities are being missed. Defra closed its consultation on the river basin management planning element of the water framework directive on 7 March. It envisages very big areas—each river basin is the equivalent of an entire region. Obviously, the stakeholder engagement—the planning—has to happen at a much more local, regional level and involve all the players. I gather that the Environment Agency does not believe that it has sufficient powers to get that engagement going and I would be pleased if the Minister refuted that.
	The issue needs to move out beyond the Environment Agency, although I accept that it is the competent authority. The water framework directive offers the tools for everyone to become engaged in this argument. Indeed, it envisages that the public would play a big part, as they need to. The Government have failed to engage in this matter with the public. There is a gap, during the next five years, when river basin planning could, rightly, involve everybody. We need to discuss how we use water, how we capture it, who pays for its pollution and clean-up, and all the other issues that we must become much more engaged with if we are to succeed in coming up with a solution.

Lord Dixon-Smith: My Lords, I am immensely grateful to my noble friend Lady Byford for stepping into the breach when my noble friend Lord Trefgarne unfortunately failed to appear at the appropriate moment. I sympathise with him, and am very glad that my noble friend Lady Byford took on the task. As always, she covered the subject with great authority and in considerable detail.
	I have an interest to declare: I am a farmer, and in 1962 I constructed a major winter storage reservoir on my farm, so of course I have a water abstraction licence. Much of what I say will be the consequence of what I learnt from that experience. One of the things I learnt gives me a frisson of terror at the state we find ourselves in today. Regrettably, as water management has in a sense become more centralised, it has become more and more short term. I wish to go right back to what has been happening to the water environment.
	As my noble friend Lord Lyell said, it is only five years ago that we were discussing major flooding across parts of the south-east. All the talk then was about the need for flood protection and the dangers and difficulties that that presented. Here we are, five years later, discussing the complete opposite—the problem of drought. The British climate is reliable in its unreliability. I do not know what we will be discussing in a year or two, but it may well be something rather different. Let us look back to the beginning of the 20th century. All our major and minor rivers had along their entire length water mills which relied on water for power. As a consequence, water was retained in the rivers, giving it more time to soak into subterranean watercourses.
	In the third quarter of the 20th century, we drained our agricultural land very effectively and efficiently. As a result, the water, instead of soaking down into the substrata, runs off the land with remarkable speed. When I was rather more engaged in farming than I am now, I could see water coming out of the pipes that I had put in—with some aid from the government—within a couple of hours of a good rain.
	When I was born, the population of this country was 45 million. After the war, when I entered public life, it was 55 million. Now it is 65 million. The increasing urbanisation that has resulted allows no water to penetrate into the sub-soil strata. All the rain that falls runs straight off the top, with the possible exception of London, where, as has already been mentioned, massive leakage takes place. London is one of those rare places in the country where the water table has been rising. How far leakage from the ancient mains—a sinking fund should have been built into the water supply system when it was created, but it was not—contributes to the rise in the water table, I do not know, but it must be a factor. I merely make the observation that when water leaks out of the mains, it is not lost—it goes into the ground and it is available for recycling and re-use.
	It is important to remember that our water environment today is very different from that in the past. If we clear water off the surface of the ground, it follows as night follows day that storage and management measures, if they are required, will inevitably be surface measures.
	There have also been major structural changes in the way in which we look after our water. When I was a young man, all our water authorities were local. For most of the country, companies were small and dealt with small, local problems, although it became a massive system in the metropolis as it had to do. As companies ran into increasing problems, we developed regional water authorities, which were subsequently put into private hands and became private monopolies. As a consequence we developed a regulatory regime, with Ofwat supervising the private utilities to prevent improper profiteering, and being remarkably successful in doing so. Its policy seems always to have been very strongly consumer-oriented to keep the price of water down. When water utilities factor that into the calculations of what they can do, they come up with restrictions on investment. Under the regime which existed before all the organisational changes came about, major reservoirs were still being constructed in this country. In Essex, we benefit from a river basin transfer scheme which successfully keeps us supplied most of the time—Essex is one of the driest areas of the country, so it is needed. However, under the new regime, it is a matter of regret that new reservoirs have not been factored in, although they are beginning to be looked at because of the increasing difficulties that we face with our water supplies.
	I come from one of those parts of Essex which would compete to be one of driest spots in England. A number of us in Essex like to enter that competition. I have to say, to my regret, that mine is no more than one of the drier spots of Essex; there are others which are far worse off. However, a study carried out in 2004 by Anglia Polytechnic University of the East Anglian region, which is the driest region of the country in all normal circumstances, showed that in a normal year only 20 per cent of rainfall was utilised. In a drought year, that proportion rose to 65 per cent. All the rest of it went out to sea. In other regions of the country, the situation is generally better: there is more rainfall and more run-off. Some regions in the west country and the north have three or even four times as much rainfall as Essex.
	What still causes me difficulty when we discuss this subject is that we have plenty of water, but we do not manage that water. Whether a national water grid or, as a friend of mine proposed 30 or 40 years ago, a canal running down the 300-foot contour of this country from north to south is a possible solution to this problem, I do not know, but the Ely Ouse scheme which transfers water to Essex is an example that we shall have increasingly to follow whether we like it or not. How far are measures such as this really to be factored in? Even if they are factored in, we shall still have an acute short-term problem, as Members have constantly pointed out today, because of the commercial development attractions in the south-east of England which do not arise elsewhere. Other parts of the country have problems with water supply for the same reason; namely, under-investment in conservation and storage. This will be a factor across the country. The noble Baroness, Lady Shephard, rightly mentioned cost. Yes, there is a cost, but cost is higher today—or tomorrow, because some of the schemes will not come about for another five or 10 years—because we failed to invest in the past. It gives me no pleasure to say it, but I do so with some authority.
	There are no easy answers to this problem. Compulsory metering, which is advocated, must be a part of the solution, because there is no incentive to look at the use of water by households which pay for it on the basis of rates. The suggestion of the noble Baroness, Lady Miller, that everyone should be made to install the most water-economical systems during a house renovation, is quite correct, but another difficulty is that most house renovations do not require permission from anyone. Perish the thought that we should get into the business of yet more regulation of what people can or cannot do in their own homes. It is a problem. Of course the market solution would be to increase the price of water. That may be an uncomfortable reality. I do not begin to know what the answer is. What I know is that regrettably over the past 10 years the situation has grown worse without the Government beginning to consider the issue seriously and proposing solutions. I accept that this is not an easy area today because ultimately we are dealing with an industry that is now in private hands. While, thankfully, that gets it out of the dead hand of the Treasury's financial controls it means that we have to find more market-oriented solutions to the problems, and need to recognise that they will have a cost.
	If we start on that matter now we may begin to improve the situation in 10 or 15 years' time if we are lucky. For the interim, we shall live on the knife-edge that has been described so ably by so many noble Lords.

Lord Bach: My Lords, I congratulate the noble Lord, Lord Trefgarne, on securing the debate and thank him warmly for his typically gracious apology for his absence earlier this morning. The whole House knows that these things happen and I thank him for the way in which he put his point. I also congratulate the noble Baroness, Lady Byford. She and I have sat opposite one another a great deal recently and I constantly admire her virtuosity. To move from closer to opener with such ease and charm is not easily done, but I congratulate her. It has been a fascinating debate with a great deal of expertise, although the idea of revolution in Kensington and Chelsea, to which the noble Baroness, Lady Hanham, referred, still strikes me as slightly unusual—certainly in Chelsea, anyway.
	The drought in the south-east is a subject of topical concern, but of course it is a long-term issue. I want to talk about government policy across the board. That will mean that I will not answer every question, but I would like to write a collective letter, as it were, on those points that I do not touch on in my answer. Water supply is a devolved matter, so I will confine my comments to England and Wales, which use the same regulatory frameworks. I understand that the current drought in the south-east has caused attention to be focused on the ability of the current water management arrangements to ensure security of supply. I will have something to say about drought later in my speech.
	It is worth pointing out that since the noble Lord proposed the debate it seems to have done nothing but rain in the south-east of England, so perhaps he should propose more and more such debates. Anyone who follows football will know that the Portsmouth-Arsenal game last week was called off because of a waterlogged pitch. But none of us is so naive as to believe that a bit of rain solves the dilemma that we all face.
	It is important to remember that droughts occurred before climate change came to the fore, and before the privatisation of water companies. Over the past 200 years there have been 10 multi-year droughts, including the current one here in the south-east. Our approach to dealing with drought has to be considered in the context of our medium to longer-term policies for sustainable water resource management. Five of the Environment Agency regions had received more rainfall than usual for the first two weeks in March. Monthly mean river-flows to date have increased and are normal or above normal at over half the indicated sites, although the majority in south-east England remain below average. Reservoir storage increased to 92 per cent for England and Wales overall, with just the Bewl reservoir in our southern region being exceptionally low for this time of year.
	The Government are committed to promoting measures to help improve sustainable water resources management in England and Wales, and we have introduced a number of important changes in recent years. Indeed, one of the main subjects of the 1997 water summit was a 10-point plan for action that included actions to reduce leakage, to improve water conservation and water efficiency, and to review the abstraction licensing system and the ways that water companies plan. The Water Act 2003, to which the noble Baroness, Lady Miller, referred, delivered the changes proposed by that 10-point plan that required new legislation.
	Let me say a word about the regulatory systems now in place. In England and Wales we have a private sector water industry, which means that companies are in the front line with statutory responsibility for delivering our water supplies. These companies are overseen by independent regulators, which operate without government interference. The economic regulator, Ofwat, oversees company business plans, sets price limits and ensures that customers pay no more than is necessary. It also has enforcement powers that can be used when and where appropriate.
	The Environment Agency is the environment regulator. It has a statutory duty to secure the proper use of our water resources. The 2001 publication by the agency was a key part of the framework of integrated water resources planning, which is carried out by the agency and water users, particularly the water companies. That publication considered both national and regional water resource strategies and progress is reviewed annually. These strategies set out pressures on water resources and how the Environment Agency expects those to be managed over the next 25 years.
	We believe that the Water Act 2003 has strengthened the Environment Agency's powers to encourage the sustainable management of water resources. To ensure that abstractions are sustainable and that the environment is protected, it is responsible for issuing and administrating abstraction licences. On 1 April—in two days' time—a revised abstraction and impounding licensing regime comes in updating and modernising a system that dates from the early 1960s, when the noble Lord, Lord Dixon-Smith, was a boy. That is a reference to his speech, by the way.

Lord Dixon-Smith: My Lords, if it was a reference to my speech I must apologise to the House: I was not a boy in the 1960s. I wish I were.

Lord Bach: My Lords, I was flattering the noble Lord rather than telling a deliberate untruth.
	I turn to long-term water resources planning and the mains water supply. The water companies have statutory duties to maintain adequate supplies of water. In 1997 we asked them to take account of the need to protect the environment in fulfilling those duties and to help to promote the sustainable use of water resources. Since then, water companies have prepared 25-year water resource plans. They describe how each company aims to achieve a sustainable supply-demand balance for the public water supply. The plans complement the Environment Agency's own 25-year strategies.
	We decided to strengthen those arrangements, and under the 2003 Act the provision of water resources management plans are to become a statutory requirement, although there will be an opportunity for the public and stakeholder groups to have their say. A consultation on proposed regulations is in progress. Water resource plans are intended to evolve in response to further and better information as it becomes available on the implications not only of climate change, but in relation to demographic change and increased pressure on housing—I have a little more to say about that. They should also reflect the Government's twin-track approach to managing water resources, which is based on, first, demand management and, secondly, developing sustainable resources where needed. We believe that demand management, including water efficiencies, should be fully explored and should be at the centre of water resource plans.
	Leakage reductions were referred to in the debate, with the noble Lord, Lord St John of Bletso, the first to mention them. They have made and will continue to make a significant contribution to the supply-demand balance. Since we asked Ofwat to set annual leakage reduction targets for each company, total industry leakage in England and Wales has reduced from 4,530 megalitres per day in 1996–97 to 3,608 megalitres per day. That is a reduction of some 20 per cent. Targets are set in relation to the economic level of leakage, which is the level at which it costs more to fix leaks than to produce water from another source. That approach provides consumers with a cost-effective approach to leakage management.
	Most companies in England and Wales are operating at their target economic levels. During the recent quinquennial review of water price limits, Ofwat assessed those levels in the light of a best practice standard drawn up in 2002 and then defined targets for 2005-10. Various options are available to the regulator when companies fail to meet their targets. Ofwat will consider the severity of the company's leakage problem and its previous performance against targets. The most common measures used are interim reporting and extra progress reports, but in the worst-case scenario Ofwat can fine a water company that is not complying with its duties or is exposing customers to worsening security of water supplies by failing to achieve cost-effective levels of leakage.
	Two companies only missed their 2004–05 leakage targets—Thames Water and United Utilities. There are action plans in place for both companies, and agreed with Ofwat, to reduce their leakage to economic levels, and it is for Ofwat to decide whether any further measures are needed. We know that Thames Water is undertaking a major upgrade of its water distribution network in London, which involves replacing more than 1,200 kilometres of water mains over five years at an estimated cost of £0.5 billion.
	Water companies are under a statutory duty to promote the efficient use of water by their customers. The Water Act introduced provision for new duties to further water conservation. Advice from water companies, audits of premises, supply, pipe leakage repairs, increased metering and so on all have a role to play in furthering water conservation, but companies can go further if necessary. They can apply to the Secretary of State for water scarcity status. At the beginning of this month, my right honourable friend the Secretary of State approved the first ever water scarcity application, made by Folkestone and Dover Water Services. The company was the first to apply under the provisions in the 1999 regulations and can now compulsorily meter its customers. The company expects its metering programme to take about 10 years. The decision was of course reached only after careful examination and should not be taken to mean that we advocate a move to compulsory metering throughout England and Wales. Obviously, any further applications will be treated on their own merits.
	The Government are also involved in a wide range of activities designed to encourage more sustainable water use. The noble Lord, Lord St John of Bletso, mentioned the Envirowise programme, which provides practical environmental advice and assistance to help businesses to reduce their water consumption. There is also an enhanced capital allowance scheme and water fittings regulations. We are currently assessing the feasibility of a product-labelling scheme to help consumers and building designers to identify water-efficient fittings and appliances.
	It is clear, as the House would agree, that reducing the demand for water is achieved most effectively through a combination of measures, including promotion of best practice, advances in technology and, when necessary, regulation. Of course we recognise that there are genuine concerns about our plans for significant household building in the south-east, and those plans may have an adverse impact on supply and demand for water in the area. That additional demand has generally been factored in to water companies' water resource plans, but those plans will need to be updated as more detailed information on housing numbers and locations becomes available. The additional demand for water from new development will also depend on the extent to which water-efficiency measures are incorporated into the new building.
	Defra and the ODPM will undertake a joint consultation on options for further regulation to secure that water efficiency. My honourable friend the Minister for the Environment, Elliot Morley, has established the Water Saving Group, fulfilling a manifesto commitment. Many departments and other bodies are on that group, which is chaired by my honourable friend. The group aims to encourage the efficient use of water in households and is defining, monitoring, carrying out and reviewing projects and work streams dealing with targets, the evidence base, best practice, education and policy.
	To manage national water resources more effectively—and here I come to a point raised by the noble Baroness, Lady Shephard—it has been proposed that we construct a national water grid. A good deal of water is already transferred within water companies' areas of operation to give individual companies greater flexibility to meet local shortages, but there would be objections if a full national grid were developed. First, there would be major environmental concerns, due to widespread excavations; secondly, there would be cost concerns, with expensive energy consumption in pumping water around the grid. None the less, the Environment Agency has been asked to do further analysis on the possible viability of such a national water grid.
	Building desalination plants is another option that water companies may want to consider. One is being built by South East Water in Newhaven. However, other companies proposing such plants will need to be able to demonstrate their sustainability.
	I have dealt with long-term planning, and I shall come to droughts in the last few minutes of my speech, but now I shall try to answer one or two questions. As for Thames Water reducing pressure to reduce leakage, companies have duties to maintain a minimum water pressure. Reduction from historic pressures does reduce leaks. The noble Baroness, Lady Shephard, asked about car washing in Oxford; the noble Baroness, Lady Byford, also asked about that. Hosepipe bans apply to car washing, but hand-washing can continue under a hosepipe ban. That is a little bit of good news.
	The noble Baroness, Lady Byford, asked whether water companies should bear the cost of repairing or renewing water mains. We believe that it is right that companies should meet the necessary costs of repairing or renewing water mains. They are best placed to plan and execute that work, and we have Ofwat to scrutinise companies' business plans to ensure that that work is necessary and sufficient.
	The noble Baroness, Lady Hanham, asked about the Thames desalination plant, and joined that with a comment or two about the Mayor of London. She will have heard this before from Ministers, I am sure, but I have to say that this decision by the Mayor is subject to an appeal, so I am not in a position to comment. I am sorry that I cannot do better on that.
	The issue of agriculture and water resources has been raised by a number of noble Lords, including the noble Baronesses, Lady Miller and Lady Byford. Agriculture uses about 2 per cent of our water nationally, but that is of course seasonal and—to use the modern jargon—spatial. In East Anglia, on which the noble Baroness, Lady Shephard, is an expert, in the summer agriculture can take as much as the public supply in that part of England. The noble Lord, Lord St John of Bletso, was interested in that as well. Spray irrigation using more than 20 cubic metres per day requires an abstraction licence; other forms of irrigation are currently exempt from licence control, but that exemption will be ended under the Water Act 2003. Compensation will be available if non-granted licences result in loss.
	The noble Baroness, Lady Miller, asked me about Bassin in France. A number of winter storage reservoirs have been funded under the socio-economic measures of the current ERDP. In the successor programme we will continue to provide funding for social and economic development in rural areas. The responsibility for delivery will be transferred to rural development agencies, which intend to introduce new funding arrangements.
	The importance of companies' drought plans has been highlighted by the current drought in the south-east. Originally prepared voluntarily, the production and maintenance of drought plans became a statutory requirement last October. The first sets of statutory plans are due to be submitted to my right honourable friend the Secretary of State this week. The plans contain various measures that may be introduced depending on the length and severity of the drought. They range from hosepipe bans to emergency drought orders.
	In its recent report to Ministers, the Environment Agency advised that we may have the worst drought in the past 100 years. But droughts are not new; they are in fact normal events that vary in intensity and duration. They can lead to some severe local conditions, as in the south-east at present, and an often patchy impact on water resources and the water-dependent environment. It is a natural phenomenon, and the steps we have taken mean we are now much better able to deal with the consequences of drought.
	In the south-east, most of the water companies are following their voluntary drought plans. They have imposed restrictions on the use of hosepipes and sprinklers. Mid-Kent Water, Southern Water and Sutton and East Surrey Water have also applied to the Secretary of State for drought orders to restrict further the non-essential use of water. Decisions on those applications are pending. Other companies may of course follow suit.
	While hosepipe bans and restrictions on non-essential use are unwelcome, the cost to a water company—and thus ultimately to its customers—of avoiding the need for such controls during a prolonged drought would be very high. It is far more cost-effective, and potentially less environmentally damaging, to manage demand and impose some restrictions to conserve water through the use of hosepipe bans and occasional drought orders and permits. Of course any restrictions on non-essential water use will be maintained only as long as the drought persists, and that is evidently dependent on the weather.
	In conclusion, the current drought is highlighting what a precious resource water is for us all. We have put in place the measures necessary to respond to periodic water shortages and promote the full sustainability of water resources and supplies in England and Wales. In particular, the statutory water resources plans will set out how water companies will secure water supplies in the medium to longer term. Statutory drought plans detail how they will respond in the shorter term to these periodical shortages, and public consultation will be the order of the day.
	It goes without saying that the solutions require a partnership that includes government, water regulators, the water companies and, not least, communities working together. That is crucial if we are to ensure sufficient supplies of water to meet demand both now and in the future. Once again I congratulate the noble Lord on securing the debate.

Baroness Byford: My Lords, I thank all noble Lords who have taken part in this debate, and again thank my noble friend Lord Trefgarne for making it possible. We are only sorry we could not hear his contribution, because we know what a great interest he takes in this topic. In winding, the Minister said what a precious commodity water is, and I think that has been reflected by us all. Several speakers have suggested ways that business, and we as individuals, could save water. The pressures on farming referred to by my noble friend Lady Shephard are key. In my haste to move this debate, I forgot to declare our family farming interest, which is not in Norfolk but in Suffolk. We also have a shortage of water from time to time.
	As the debate went on, it reflected that we have plenty of water, but often in the wrong place and at the wrong time. That shows that we need vigorous and rigorous management of our water, and our water use. The building of new homes, particularly in dry areas, was mentioned by many Members. The Minister said we would be going to consultation, and I was slightly alarmed that we had not done so already. I rather assumed we would have done. Although I was satisfied by many of his answers, that one alarmed me.
	My noble friend Lord Dixon-Smith gave us a good example of someone who, in his own family farming interests, had great foresight. He lives in a dry area, and needed to make some provision for it. The investment they made all those years ago has been well rewarded over the years.
	There are many other things I could say, but it would only underline the quality of debate we have had today, which has ranged from individual to industry to farming and to the natural environment and our wildlife protection. Although the Minister was not at the time in his present post, the noble Baronesses, Lady Miller and Lady Farrington, and I spent hours on the Water Act, trying to ensure that the Government appreciated that investment in water is a long-term business. It is one thing I think we eventually managed to bring to the fore.
	I thank again all noble Lords who have taken part in the debate. It has been a great joy to participate in it. I beg leave to withdraw the Motion for Papers.

Motion for Papers, by leave, withdrawn.

Rural Payments Agency

Lord King of Bridgwater: rose to call attention to the Rural Payments Agency; and to move for Papers.
	My Lords, I start where my noble friend Lady Byford left off by declaring my own interest in this subject. I make no apologies for declaring an interest; it means I actually know a bit about it, and something of the problems. My son-in-law is now involved in running our farm, and he has been trying to cope with that. While I have noticed the maps going backwards and forwards, it was not until I was asked by my noble friend Lady Byford to open this debate that I came to understand just what a scale of shambles that now represents.
	I was interested in the exchanges that took place on a Statement in this House earlier this week, when my noble friend Lord Monro said that he thought it was the most disgraceful Statement on agriculture he had ever heard in the House. The Minister challenged him, and thought that that was an unfair comment. With great respect, I do not know if the Minister knows my noble friend well, but he has been in this House or the other place for 44 years, so he has some experience of these matters. He was a distinguished Minister working with me in the Department of the Environment, and is very familiar with agriculture questions. His judgment is one that I respect on this matter, and one that I endorse.
	I start from the position that we are now dealing with an industry that the Minister knows—everyone knows—is not the strongest industry in the United Kingdom. It faces major challenges. In many parts of the country, the whole future of farming as we know it is in question, as are the survival of family farms and the fabric of our countryside. It is an industry that is entitled to expect accuracy and efficiency from government. It will not always get everything it wants, but if it can no longer believe anything Ministers say to it, or have any confidence whatever in announcements that are made, that is a very serious situation. Sometimes those announcements may be on policy and strategy. These questions and statements directly affect the financial viability and survival of a considerable number of family farms in this country.
	Today the Minister can get away with saying that he has had consultations, he has talked to representatives of the industry and of associated industries, and he has talked to the banks, and they have not yet reported the situation. We are not quite there yet. I do not know what the outcome will be in the next month or two regarding Lady day—the traditional date for the payment of rent—or the position of tenant farmers who believed the Minister and thought they would have funds available. The state of the industry is no secret to many farmers at present, and the single payment is a critical element in their finances. In many cases, banks feel that they have already over-lent to farms and agriculture, and are not too willing to extend further credit. What the consequences of this may be, I would not presume to comment on in detail today. There have been, in yesterday's debate in the other place and in Westminster Hall, some very serious warnings on this matter. From the distinguished list of speakers who will follow me in this debate, and given their considerable experience, I have no doubt that we will hear clear warnings of what the consequences may be.
	Looking at the background to this, I have always had some reservations about the system of key targets. I am sure the Minister might share some of that concern. I see that key target number one in the RPA business plan, accepted by Ministers, is that payments under the single payment scheme should commence by February 2006, and that 96 per cent of valid SPS claims should be processed and paid by 31 March 2006. Has any key target in any government department ever been so spectacularly missed? This is, as the Minister will recognise, key target number one. It will pose enormous problems for those concerned. My understanding is that, far from processing 96 per cent by the end of March, the figure is now 23 per cent—although there may have been some modest improvement on that—and payments to the industry, to farmers up and down England, are now £1.1 billion behind what the Government promised. For an industry facing such financial challenges, that is an incredible figure.
	It could be said that this is all very unfair and that Ministers could not possibly have anticipated the problems they now face. So, I look to see just how many warnings the Government received. Warnings were given back in 2003; there was a warning when the announcement was made by the Secretary of State in February 2004; and most significantly, a warning was given by the Select Committee in January. Its report was rubbished by the Minister at the time, but on reading it since, it appears to be incredibly accurate. On making the decision to adopt the dynamic hybrid approach, the All-Party Select Committee said:
	"We believe Defra gave insignificant consideration to the administrative complexity of the chosen model. Defra should also have considered postponing implementation of the SFP until 2006, as allowed for in the CAP reform regulation, to allow more time for preparation, thus avoiding the problems that are now evident . . . the lack of foresight shown by the RPA, and the apparent lack of analysis about the possible impacts of the implementation model are not acceptable. Further, we believe that both Defra and the RPA should have anticipated the extra work involved in this project".
	I do not think that anybody would now seriously disagree with that Select Committee report.
	The Government chose to pursue what is called in the jargon, the "dynamic hybrid model". They turned their back on the idea of a more transitional arrangement, as referred to by the Select Committee, and introduced this new scheme into a department which—as all those who have had contact with it over many years will know—is, to put it simply, not the strongest department in government. Remember the BSE crisis or the foot-and-mouth situation, in which the Prime Minister himself realised the limitations of Defra's capacity in this area, turning, at the moment of greatest need, to the Army and the famous brigadier in order to resolve the situation. This is not a department that should have been faced with extremely complicated new arrangements, and then expected to deliver to a very tight timetable. What Ministers asked the RPA to do indicates a serious lack of judgment.
	I turn to the background to this. I have read the Select Committee report. At the Oxford Farming Conference the Minister indicated that the target of 96 per cent would not be achieved and that the true figure might be as low as 50 per cent. Following that, the Ministers said that they did not become aware until 14 March that payments would not be made a fortnight later on 31 March, as they had originally indicated. I cannot, in my experience, recall an incidence of more inadequate and incompetent handling, be that by Ministers, officials or the RPA. The fact is that somebody has blundered; there is no question about that. I have some sympathy with the Minister, because he was not around when the decision to follow this particular scheme was taken. The Secretary of State was in another department. Margaret Beckett, Secretary of State at the time, announced the decision in February 2004.
	We are now in a situation in which not only did people know that the target would not be achieved by that date, but—as far as I am aware—there is no information about when payments will be made. I understand that there is a legal obligation for these payments to be made by 30 June. If that is correct, can the Minister assure us today that all payments will be made by the end of June? If he cannot give that assurance, what will happen to the people who—if they are able—then have to borrow money and pay interest, possibly at not very advantageous rates if they are already outside, or at the ceiling of, their borrowing limit? What will the Government do about them and this most unhappy saga? Can the Minister at last clarify the situation today?
	I turn to the seriousness of this matter. In my own ministerial activity, I was occasionally accused of being a "hands-on" Minister. That is sometimes a criticism; Ministers can become too involved, but sometimes Ministers have to get involved. They have to be able to ask the right questions; they have to be able to challenge their agencies and their officials. At the end of the day—and I hope this is not old-fashioned—I happen to believe that Ministers bear the ultimate responsibility. It is not a matter of there being no bad Ministers, only bad officials. Officials cannot speak for themselves; they must depend on Ministers to stand up for them. I think it has been noticed elsewhere that when the Secretary of State, on being challenged on this matter in the House this week, was asked about her approach to ministerial responsibility, she gave the unique answer:
	"I am taking responsibility, which is why I removed the chief executive".—[Official Report, Commons, 27/3/06; col. 552.]
	It was not the chief executive who took the final decision as to what the system should be. In this situation, the consequences may lead to the bankruptcy of some of the ancillary firms involved. If they were in a strong position that would be an extravagant—maybe unjustified—comment to make. As the Minister knows, some areas of the industry are in great difficulty. What are we going to do about the farmers whose sense of responsibility means they will not order anything they cannot pay for, and have therefore held up their orders for seeds, cultivations and tractors in the current year? What will happen then to those still waiting and who do not know when they are going to be able to go ahead? They run the ultimate awful risk that they might lose the season.
	Against all those backgrounds, at the very least today, the House, the country and the agriculture industry are entitled to know when these payments will be made. They are entitled to expect action from those who took the ultimate responsibility for the installation of this new system, when they could have allowed a transitional period to allow the details to be ironed out. They now face a crisis—which it undoubtedly is in many corners of the agricultural industry at the present. I do not expect anything to happen. I do not think that this Government actually accept the convention for ministerial responsibility in the way that I happen to recall that the former Leader of your Lordships' House—in the shape of the noble Lord, Lord Carrington—accepted. Although he did not actually have a direct involvement, at the moment of the Argentinian invasion of the Falkland Islands he immediately tendered his resignation.
	My noble friend Lady Byford referred, in much gentler terms than mine, to the need for Ministers to consider their positions. I noticed that the Secretary of State, rather charmingly in her Statement last week, made clear in the fourth paragraph that this was the Minister's area of responsibility and not hers. In this situation, if Ministers have responsibility, for my noble friend to say that the Minister should consider his position was the most modest phrase that she could have used. He chose to deride it as cheap. That was an unfortunate remark to make because there is a serious crisis. The Minister is a decent and honourable man and, at the end of the day, faced with the scale of what has happened, he has the duty to consider his position here today. I beg to move for Papers.

Lord Grantchester: My Lords, I am grateful to the noble Lord, Lord King, for introducing this debate today on the independent delivery agency, the Rural Payments Agency. At the outset, I declare my interest—as a Peer sitting on the government Benches—as a dairy farmer in Cheshire and as a director of Dairy Farmers of Britain, a co-operative of some 3,500 dairy farmers. I have also been the president of the Royal Association of British Dairy Farmers and chairman of the Cheshire branch of the CLA, as well as being a member of the NFU. However, my words today are spoken merely as a dairy farmer.
	The Government and the Minister at the time, my noble friend Lord Whitty, are rightfully to be congratulated on the announcement on 12 February 2004 that, as part of widespread and continuing reform of the common agricultural policy, England would introduce the single payment scheme on the dynamic hybrid model. Farmers' payments would be based 90 per cent on historical claims and 10 per cent on the area farmed. Over time, this would change from historical predominance to payments per acre of holding. That was part of the process of changing payments to farmers from being production-based towards being based on environmental and other benefits. Payments cannot be justified on some ever-receding historical production level.
	While this system is obviously more complex than the purely historical system introduced by Scotland and Wales, among others, that announcement was now more than two years ago. However, complexity has been compounded by further changes—for example, changes to the definition of who is eligible, what is eligible and what are the requirements with adjustments for hardship and national reserve cases, appeals, treatment of common land and set-aside. One might ask whether it was then wise to overlay IT, office and staff changes. There has not been a settled team working in a settled work environment.
	Does that entirely excuse what other noble Lords will be describing today? I believe that most of the problems are consequential on the fact that the mapping process that is obviously required for the area element of the payment has been ineffective. I know that the noble Earl, Lord Erroll, will come up with some interesting theories later concerning that. From my farm, I have received differing maps about every two months or so, each one bearing little relation to the map previously sent to me and no relation to the corrected maps that I return each time. Why should that be, given that I had very adequate maps provided under IACS previously?
	It is extremely disappointing that this mapping process has not been completed prior to the payment window opening. As I understand it, of some 120,000 applicants, 55,000 have been validated for payment—although I understand that some of these are still incorrect—leaving 65,000 invalidated and with notification of entitlements unreliable. My noble friend cannot be held responsible for the operation of this delivery agency. However, he will be anxious that its performance will be reflected in people's assessment of the Government and their administration. How can my noble friend be told and repeat on 2 February that the bulk of payments would be completed by the end of March and then, some mere six weeks later, on 16 March, be told that only 7 per cent of claims have been paid with only two weeks to go?
	Can I tempt my noble friend with some helpful suggestions? It would help customer relations enormously if the agency's attention could change from overindulgent procedures to avoid disallowance and from focusing on the potential fine for failure to implement the EU regulation by June. Instead, let us see what can be done to implement partial payments. After all, 90 per cent of claims are on an historical basis. We should change the process to one in which staff operate as case officers for individual claimants rather than undertake the task-based approach. We should allow communications with claimants so that they can understand to some degree where they are, what they can tell their bank managers and what probable outcomes they must plan for. We should state on entitlement statements the calculations used to arrive at an award, so that claimants can follow and check the validity. We should announce that penalties for late filing will be waived so that errors are not needlessly exported into next year's system. Also, we should get the outsourced mapping contractors into the RPA offices to work as a team, eliminating any IT glitches.
	No doubt the Minister is seeking deadlines on which he will expect answers to many problems. Will he say what disciplines he has called for to give this House confidence that everything is being done to expedite matters? The lack of funds into the rural economy is resulting in severe stress, anxiety and economic hardship. I understand that some £10 million as interest is being transferred from farmers to the banks. That money is urgently needed to help the transition that we all seek towards the revitalised sector.
	The SPS system is not the only source of funds that the RPA processes into the rural economy. I also refer, as far as livestock producers are concerned, to the compensation payments consequential on disease, especially bovine TB. The House debated the Cattle Compensation (England) Order 2006 on Friday 10 February, although regrettably I was unable to be present.
	I am aware that one must be extremely careful when venturing into areas that impact directly on one's own affairs outside this House. However, I can assure my noble friend that this system is in need of urgent improvement. Although it may be effective for a large part of the cattle population, 47 cattle categories are inadequate to do justice to the multitude of herds, ages and standards, especially breed improvement programmes undertaken to add independently assessed value to a farmer's herds. Moreover, these breed improvement programmes have as their main feature longevity and welfare implications. This tabular system is based on the auction system whereby a vendor has to rely on what a purchaser is prepared to pay. It entrenches the system whereby farmers must accept what is offered for their produce, be it cattle, milk, cheese, beef and so on. The tabular system fails to take into account private sales where the vendor can, to some extent, name his price. It also fails to recognise that many herd-improving cattle are not traded at all, as they are retained to produce and pass on genetic superiority to their offspring.
	Holstein UK, the registration body for pedigree black and white cattle, which also undertakes registration programmes for six dairy breeds and one beef breed, has been working with the National Audit Office to authenticate price banding according to independently set breed improvement programmes. Information is independently verified by the Centre for Dairy Information. The tabular form is blighting the value of herds, reducing fair comparisons and fair compensation to perhaps the top 20 per cent of cattle and their owners. Genus, a publicly quoted company, is to be congratulated on breeding a bull called Picton Shottle, which has been independently assessed as being internationally superior. His services are much in demand. God forbid, but is he to be valued on the same basis as a herd-bred pedigree bull? I suggest that the NFU should still advise all members to undertake an independent valuation of cattle caught by bovine TB and to attach it to their form, BT1(1/06), on the valuation of bovine animals. We might then be able to follow this up.
	I mention that as a further example of resources that are not getting through to rural areas. I could also include diversification grants, set up to encourage new enterprises. My noble friend has direct experience of difficulties that can be encountered if the pace of change is too great. While I applaud the enthusiasm for change shown by my noble friend, perhaps I can tempt him to be aware that these are extremely testing times in the rural economy and that more time may be required to effect a lasting transformation.

The Countess of Mar: My Lords, I, too, am grateful to the noble Lord, Lord King of Bridgwater, for introducing this very timely debate. I declare my interest as a partner in a small family farm. While we have applied for payments under the single payment scheme—SPS—we are not, thank goodness, in any way dependent on them.
	I am deeply dismayed by the complacency displayed by the Minister and his right honourable friend Mrs Beckett to the circumstances of those farmers who are now in dire financial straits because of a series of management failures that were forecast several years ago. I have no doubt that other noble Lords will speak very movingly about the farmers' plight.
	Why has this failure occurred? Why is it that nobody seems to have had the courage to tell Ministers that things are going disastrously wrong? As the noble Lord, Lord King, pointed out, even when Ministers were told by the EFRA Select Committee in another place, they insisted that the committee was wrong. Why is it that Ministers were so unaware of what was happening? Were they taking the glossy annual reports, with their glowing record of targets achieved, at their face value? Did they ever ask about targets that were not achieved? Why, when all the alarms were sounding from at least November 2005, and probably much earlier, did Ministers not heed them? Could it be that facing the facts became so repugnant that an ostrich-like mentality set in?
	It is not good enough to blame the previous administration, as the Minister did last Monday in his response to the noble Baroness, Lady Shephard of Northwold, when he said,
	"it was the noble Baroness's government who set up the introduction of arm's-length delivery agencies".—[Official Report, 27/3/06; col. 605.]
	The blame falls fairly and squarely on the present Government and they must accept that responsibility. It was they who, as the noble Lord admitted, set up the RPA. It has been their policy that has driven the agency and it is they who appointed an apparently incompetent team to run it.
	I do not believe I am alone—from what the noble Lord, Lord King, has said, I know I am not—in finding distasteful the Minister's response to the noble Baroness, Lady Byford, despite his kind words to her today. Last Monday, she suggested that the Minister might like to consider his own position, to which he said:
	"we take our responsibilities extremely seriously and I think her remarks were a little cheap".—[Official Report, 27/3/06; col. 604.]
	If the RPA were a commercial business, there is no doubt that those responsible for this disaster, whether in the field or at arm's length, would have resigned of their own volition or would have been sacked.
	The Minister's right honourable friend Mrs Beckett said in another place last Monday:
	"It has to some extent been asserted that the Government were warned from the beginning that the RPA could not handle the scheme. No, we were not: the RPA gave every assurance that it could indeed handle it. As for whether Ministers take responsibility, I am taking responsibility"—
	the noble Lord, Lord King, has already said this—
	"which is why I removed the chief executive".—[Official Report, Commons, 27/3/06; col. 552.]
	This is risible and indicates a total failure by the Secretary of State to question the organisation for which she claims responsibility.
	Surely the previous chief executive, Mr Johnston McNeill, must have known what the problems were. Surely the RPA senior management team must have known what was happening. What was the RPA's audit committee, which is tasked with the duty to advise the chief executive,
	"in respect of the RPA's accounts, internal control systems and internal and external audit",
	doing? As, according to his right honourable friend, the Minister has spent not just hours but days working on this over many, many months, why did he not know what was happening?
	I am finding it difficult to understand just what the current position is of the former chief executive, Mr Johnston McNeill. The Minister said on Monday that he had been removed from office and that, as far as the Minister knew, he was still in receipt of his salary. I note from the annual report for the year 2004–05, the latest published on the RPA website, that one individual was in receipt of an annual salary of between £225,000 and £230,000. Will the Minister please confirm that this is the salary of the chief executive, and will he please tell the House what that salary is today? Is the noble Lord able to confirm that interviews are currently being conducted for his replacement? If they are, how is it that no decision has been taken on Mr McNeill's future duties, as the noble Lord told the House on Monday?
	What independent assessment is being made of the competence of the chief executive and other members of the Ownership Board and, if they are found to have misled Ministers as to the true state of affairs at the RPA, what are the sanctions? The noble Lord has said that the former or suspended—we do not know—chief executive is entitled to some rights. Will he tell the House what those rights are? How much are they going to cost the taxpayer?
	The next question is: how can we retrieve the situation? The noble Lord, Lord Grantchester, has made some very useful suggestions. Although many criticisms have been levelled at staff who must field the telephone calls of justifiably irate farmers, I have always found them to be courteous and as helpful as they can be in the circumstances. It is not their fault that they are inadequately trained and that they may not understand exactly what they are supposed to be doing. Most of them will probably have no experience of agricultural, let alone rural, life. It is my understanding that staff have been moved around according to the exigencies of the service and that a lot of temporary staff have had to be employed. This must mean that they are given little opportunity to be trained, let alone to settle into a task—another point made by the noble Lord, Lord Grantchester. They are the first point of contact for customers of the agency. Anyone who has ever had anything to do with a business that involves dealing directly with customers knows exactly how important it is to have informed and efficient front-line staff.
	It is also my understanding that the computer system is far too ambitious for the job that it was designed to carry out. It strikes me that too much has been expected of the whole organisation since its inception. I wonder whether noble Lords realise that the Rural Payments Agency operates 97 different CAP schemes in addition to the single payment scheme. It will almost take a miracle for the vision, details of which are to be found in the RPA strategy for 2004-09, to materialise.
	I believe that much of the problem lies with too much policy and not enough management and practicality. It may be laudable that the RPA wants, as it says in its strategy,
	"To be a customer focused paying agency, respected as the European leader in efficient and effective administration and as an authoritative source of advice to policy makers".
	What a dream. It seems unlikely that its current structure will allow that to happen. Instead of allowing the RPA to grow naturally, the policy makers seem to have asked it to take on more and more elements when an inadequate management could not say, "Enough is enough". They have failed to ensure that staff are trained and ready to take on the extra work and that they have the tools with which to do it. This seems to be a case where the economies of centralisation are outweighed by the inefficiencies created by the complexity of the tasks allocated to the organisation. Will the Minister say whether any lessons have been learnt from this experience? He said that a new chief executive or acting chief executive had been parachuted in—not his words, but that was the inference—and I wonder whether he considers the next person on the ladder of command to be a new person, when he has already proved his inadequacy on the board, and whether he is a suitable replacement.

Lord Desai: My Lords, I have no agricultural interest to declare. I am about the only speaker this afternoon with such a problem. My first job was in agricultural economics in America, when I was involved in looking at payments for dairy farmers. That convinced me that every payment system was a nightmare.
	We are all grateful to the noble Lord, Lord King, for introducing the debate. As he rightly reminded us, we have had some serious disasters on the agricultural front in the past 10 or so years. While I have been here—15 years—we have had BSE, which was a major disaster, and then we had foot and mouth disease. The feeling I get, having read the debates and having talked to people, is that, as serious as this situation is, it is not on the same scale as either foot and mouth or the BSE crisis. I am not trying to be complacent, but I am putting down a marker.
	In the debate in another place yesterday the honourable Member for Vale of York said that normally farmers carry a debt of around £50 million per month. In the foot and mouth case, it went up to £80 million. She gave an estimate that due to this delayed payment £8 million had been added to the debt burden of farmers. Those are her numbers; I did not make them up. We are talking about, although I do not want to minimise the problem, a 16 per cent extra debt burden on the farmers. This may be unrealistic. As I said, I am not a farmer. I am quoting opposition numbers, rather than government numbers. I will quote government numbers in a minute.
	Again without trying to underestimate or underplay the crisis, the Minister said yesterday in another place that 23 per cent of payments had been made by close of play yesterday. That is not anywhere near 96 per cent, which was the target, but 23 per cent of payments had been made by 29 March. My guess, although I am not a Minister, is that it should not be beyond human ingenuity to pay all the money by the end of June, which was the close of the window.
	The noble Countess, Lady Mar, asked what lessons can be learnt. Clearly, if you set up an arm's-length agency—regardless of who set it up—Ministers cannot interfere on a day-to-day basis. If somebody comes to them 15 days before the deadline saying that the whole thing has gone belly up, you sack the person concerned and you start all over again. It is bad, but I do not know to what extent you can simultaneously have a devolved agency to do the work and hold the Minister responsible on a day-to-day basis for what that agency does. People who have been Ministers can probably tell me more about honourable resignations in the past, mentioned by the noble Lord, Lord King. He gave the example of the noble Lord, Lord Carrington, whom we all admired when he resigned his position as Foreign Secretary, but I genuinely do not recall how many people resigned in the BSE crisis. I do not think that resignations would help a single farmer get even one extra pound tomorrow. Resignations are, however, a political thing.
	Our first lesson is that the whole relationship between devolved agencies and ministries has to be rethought. Secondly, again and again we have computer systems that do not work. This morning the Financial Times carries the news that Accenture is going to pay £294 million to the Department of Health for a computer software glitch it was responsible for—that is about half a billion dollars. Mistakes like that happen with companies like Accenture. Fujitsu also has noted that it is going to lose money on the software system that it was providing; it has sold its software subsidiary. Clearly the computer system has gone wrong. Again, we have to learn how to do this properly. If there is a reform of CAP going on and the payment basis is changed, it behoves the Government and the agency to start changing the system ever so gently from being based 100 per cent on the new method to a mixed system.
	I gather that, with the new system being based on land area, maps are imperfect. Maps were not needed before, because the payment system was not based on maps. If you suddenly want accurate mapping of all of England, it should have been done on time, but it turns out that only the Reading office of the agency can do accurate mapping. Again, the honourable Member for Vale of York asked yesterday what an office in Reading would know about north Yorkshire. I presume that it can read the maps. It does not have to know the problems of north Yorkshire; it only has to know something about the mapping.
	The chief executive has been sacked and the new executive put in operation. I have to compliment the new person. He is not giving a hopeful and totally unrealistic estimate of how soon payments can be made, unlike his predecessor. It is a bad situation and people are suffering—I do not deny that. It is difficult, if not impossible, for the Government to pay interest on delayed payments. We have had the discussion about the Government meeting their payment obligations on time over many years, but we have to remember that the resignation tomorrow of every Minister in Defra would not solve any farmer's problems. Rather than calling for resignations, we have to learn the lessons, and next time this happens, we will be much better prepared.
	I will make one remark more as an economist than as a farmer. It is very surprising that with an industry historically based on uncertainty in payment receipts and uncertainty of weather and so on, banks are still not able to cope. Banks should have already invented instruments of credit that would take on board such uncertainties. That is a market failure. I am very surprised. After all, people have been doing this for ages. Why have the banks not up till now invented an efficient credit instrument that will cushion farmers? Why are there no good insurance schemes? If there are, I would like to know. This is a classic case for insurance—again, I speak as an economist. One can see clearly the uncertainties of the profession. There should be in place an insurance scheme. This is again an example of market failure.
	In the longer run we ought to worry more about those issues, so that the recurrence of such a problem will have a lesser impact on people who are clearly suffering, than about who is in office or resigning Ministers.

The Earl of Erroll: Is it me now, my Lords?

Baroness Byford: My Lords, the noble Baroness, Lady Farrington, announced earlier that there had been a mistake. The noble Baroness, Lady Shephard, was due to speak in the previous debate—as she did—but is not here to speak in this one, so it is now the noble Earl, Lord Erroll.

The Earl of Erroll: My Lords, I am sorry. I arrived just after the debate had started so I missed that announcement.
	I thank the noble Lord, Lord King, for providing the opportunity to debate this subject. I declare an interest up-front in that I am married to a farmer. This situation, plus all the changes associated with it, has been causing us a lot of grief over the past couple of years and has wrecked a year of our life. We have had to absorb an amount of paperwork on top of all the other legislation that has come out relating to health and safety, cross-compliance issues and so on, so it is not just a simple matter of trying to get one little thing right.
	I feel slightly sorry for the Minister because I think that he has been badly misled by the agency. I have always been very concerned about the concept of agencies being hived off—almost as part of the Civil Service but not quite—so that we could never get to grips with them in Parliament. They could always hide behind their remit and were not directly responsible. That allowed a loss of control and a loss of information to occur. I am concerned that we are setting up Natural England in the same way. I can see that we are not learning from our mistakes, and I think that hiving off responsibility to large agencies is very dangerous.
	My background is in IT and software development. I wrote a lot of farming software years ago. I then married a farmer, and I have also learnt how to do digital mapping as a result of the move to the mapping system. My wife will not sign off maps unless she knows that they are 100 per cent accurate. The justification for relating what has happened to us is simply that the same thing has happened to 65,000 others. Those people cannot get their money either, and I hope that some lessons can be learnt.
	I say to the noble Lord, Lord Desai, that the situation is very serious. Anecdotally, we have heard of three suicides locally. The trouble is that the problem is exacerbated by the paperwork and everything surrounding it. People did not go into farming to farm paperwork. If farmers are already at their financial limits, they cannot extend their overdrafts. Therefore, although the debt burden overall may not seem terribly serious, individual farmers are at their limit. Speaking personally, we are able to weather the problem at the moment but I shall give noble Lords an idea of the situation, given that the farming subsidy structure has been relied on for many years and cannot be cut off overnight.
	The last payment to my wife, who is an arable farmer, was in November 2004. Normally she would have been paid in November 2005 and that would have paid for seeds, fertilisers and sprays so that she could continue farming over the next year and pay off some of the debt while the harvest was being sold from the previous year. Currently, she has not received a payment for 16 months, as opposed to a year, and that has to be covered somehow. She has to buy the materials to continue farming for the next year and that is very difficult—her money has to come from somewhere. Without a happy bank manager, basically you have to fold. For arable farmers, the crunch point is now. If they cannot get further loans, they will have to go out of farming—there is no other option. That is why the situation is so serious.
	I shall try to describe the root of the problem. The digitisation exercise was started several years ago but, at that point, we had an arable area payment system which depended on certain definitions of land and so on. As the digitisation process went forward, it was not properly explained that there would be new rules on what qualified for future payments. The single payment system and the entry-level scheme suddenly came in but there was no real information on them until much later. In September 2004, we arrived at the point where the maps were based on an old idea of what should be submitted to Defra but a whole lot of new stuff then qualified and had to be included, so suddenly all the maps needed to be revised. I do not think that anyone had realised that until it was far too late.
	We submitted the necessary corrections and registered for "fast track" because we realised that the entry-level scheme money would also be vital to the profitability of the farm. To do that, we also needed to get on with our woodland areas and so on. However, the maps did not appear and we could not apply for the entry-level scheme in August. We started to panic and telephoned the agency. Then, around October, we were told, "We're terribly sorry. It's all going to slow down again as there has been a change of policy". I think that that is probably when university students stopped being directly employed to do the work and the department switched to an outsource process. Perhaps that had been planned earlier—I do not know—but there was a huge slowing-down in the process.
	Months and months after submitting our application, just before Christmas on 23 December, we received maps covering about 80 per cent of the farm estate with a requirement, set out in an abrupt letter, to return them within seven days—not working days but seven days over Christmas—if we wanted to make any changes.
	In the mean time, in trying to enter the entry-level scheme we also established from the Rural Development Service that a lot of the land had been lost and was no longer connected, so nothing tallied. The maps that we received in December were not too bad. When I looked at the overall hectarage of the 80 per cent of the land covered by the maps, it came within 0.04 hectares of what I thought it should be according to our digital maps. Therefore, we concurred because at that stage we were both working from Ordnance Survey landline-based data. We only needed to get the remaining 20 per cent registered and we could then go ahead with the entry-level scheme.
	We had a few problems. We got a note from the Countryside Stewardship Scheme, which was clearly working on out-of-date maps with different areas and so on. We also received material from the customer services centre in Newcastle, which showed that the staff there were working from maps with changes on them which went through from 23 December, and from the old 2004 pre-change maps. There was obviously a muddle.
	In March, we were worried as we started to receive maps with completely new areas on them. I realised that I was probably looking at a new mapping system based on the Ordnance Survey master-map series, and that maps had been changed in the middle of the operation. We had problems because people had made arbitrary decisions about where the field boundary lay and that did not concur with the old information. That was particularly the case with the old Countryside Stewardship Scheme agreements, where a boundary might date back to well before certain other things had changed in the fields. Therefore, if you did not go back to the old boundaries, you would have to rewrite legal agreements as well. We were left in confusion and with problems.
	Yesterday, we received some maps and we are now down to only two-thirds of the farm estate being mapped. We seem to have lost an awful lot, so I suppose that I have to go through the whole lot and send them back again. The problem with the mapping, and the reason that it is so important, is that it triggers everything else. The maps are the key to everything: nothing can happen until the maps are agreed. Out of them come the tables from the customer services centre and therefore the entitlement statements. The Countryside Stewardship Scheme, the entry-level scheme, the farm woodland grant scheme and the Forestry Commission woodland grant schemes are triggered by the maps. The sad thing is that, according to the unverified statements sent out not very long ago from Newcastle, we were within four-tenths of a per cent of agreeing the total area for the single payment system claim, but we will not receive anything.
	Money is the key to this. I think that the Minister is responsible for sustainable farming, but you cannot sustain farming without money. An online poll in January showed that 62 per cent of farmers were already in financial trouble. I do not know whose money it is. Who is accruing interest on the billions of pounds that are sitting there? I do not know whether the amount is £1.6 billion or £3 billion—I read different articles. Presumably the Government are getting the interest on that money, so why can they not pay it out to keep farmers, and perhaps the bank managers, a little happier?
	I have a question. My wife told me that after 30 June this year, the EU will cease to have to pay this money and the Government will have to pay it from UK funds instead. Is that true? There are further problems. What happens if two payments arrive next year? What about the tax issues? Will we be allowed to refer one tax liability back to this year? We have an enormous tax hit. As you have to pay your tax up-front for the following year, that will bankrupt a few people too.
	By 16 May we have to fill in the next SPS forms, but which areas do we put on them? If we show the same areas that we put on the previous form, will we receive penalties if penalties had to be paid on that one? Will we get penalties over two years just because we are sticking to our guns and, inadvertently, did not realise that there was a mistake? We hear that there are heavy penalties with regard to cross-compliance. An eastern region farmer has been penalised 15 per cent for going over the top with some fertiliser on an FP209 recommendation. People are heavily active on the penalty side. It is sad that there is no Smithfield this year. I am sorry—I am jumping all over the place.
	In conclusion, what is the way forward? I am not sure that promoting the second in command, who was probably responsible for instituting these procedures, into a position of control is the answer. For those who have digitised their farms accurately, the digital maps could be accepted. We need to speak one-on-one with the people doing the mapping to sort out the boundaries. We need to know why they are moving the boundaries, so that we can agree them.
	We could make historic payments. Ninety per cent of the single farm payment is supposed to be based on historic payments. We know what those are, from last year. It could, therefore, be 90 per cent, as long as we know the base years being used for those of us who have rebased. We do not even know whether that has been accepted, or if the data have been lost. There are a lot of complications. I am happy to talk to whomever about how they can be sorted out, as I have quite a bit of experience.

Lord Dixon-Smith: My Lords, I, too, thank the noble Lord, Lord King of Bridgwater, whose enormous experience of government made him a very appropriate person to open this debate.
	When dealing with the government Statement on Tuesday, the Minister appeared somewhat surprised that the opinion of my agricultural acquaintances— I declare my interest for the second time today as a farmer—was rather less complimentary than he appeared to think that it ought to be. I hold up a paper to demonstrate why that is so. The Minister recognises it instantly as the March version of Farming Link from his Department. It came out with a survey requesting information on the quality of the service that it provided a fortnight after it was announced that the payment system was broken down, with the headline:
	"Full payments on track for farmers".

Lord Bach: My Lords, it did not come out a fortnight after 14 March. It was being distributed both before and after 14 March, and we are putting out a correction to the headline, of course. I should be grateful if the noble Lord would just keep to the facts.

Lord Dixon-Smith: My Lords, I am grateful to the Minister, but my copy arrived after the announcement was made. That may be due to vagaries that are beyond his control. This is part of the problem: so much is beyond the Minister's control.
	During the debate, the Minister sought to make some capital from the fact that independent service agencies were a Conservative Party invention. That was a perfectly reasonable thing for him to do. In discussions on this subject, the Minister has said from time to time that they are independent agencies, so if they give assurances that all is well, that should presumably be instantly accepted by Ministers. I would not have commented on their independence had I not found the remarks made by the Minister's honourable friend Mr Bradshaw in a debate in Westminster Hall yesterday. He states:
	"On 20 February payments began to flow as had been forecast. However, on Friday 10 March, after fellow Ministers had requested a qualified update of actual payments being made, the RPA still advised that 51 per cent.—one could argue that that represented the bulk—would be made by 3 April and that 96 per cent. would be made by the end of June. Just four days after that, on Tuesday 14 March, at a meeting with the Secretary of State, the RPA chief executive reported for the first time that the forecast of the bulk of payments being made by the end of March would not be met. He reaffirmed that 96 per cent. of payments would be made by the end of June. The next day, on the advice of the DEFRA permanent secretary, Mr. McNeill was removed from his post".—[Official Report, Commons, 29/3/06; col. 303WH.]
	What is the independence of an agency if the head of the organisation can be instantly removed? But that is not what I want to talk about today. I merely make the point.
	It is fortunate that I am following the noble Earl, Lord Erroll, because he was discussing problems of mapping, which is probably at the heart of this whole disastrous affair. I am sure that no one wants to be in this Chamber today having this debate; we would all prefer that the need had not arisen. I refer to the experience of one estate owner, and the noble Earl says that the problem goes back a long way.
	The estate owner's experience began in September 2003. Version one of the maps ran to some 32 pages, of which only three contained no errors. The necessary corrections to the remaining 29 pages were duly made and returned. Version two of the maps was sent in September 2004. He was told that it was the final version and that any adjustments would have to be made on the IACS 22 forms. Version three of the maps arrived on 16 March 2005, and version four on 4 April 2005. By the time he sent his SP5a form to the RPA on 10 May, the areas were still not agreed, and version five of the maps was received in May 2005.
	To date, there have been seven versions of the maps, none of which has been without error. By the time version six arrived, the number of errors had been reduced to six. One might think that that was progress. However, on 26 October 2005, he received version seven. Although the six errors had been corrected—hooray—something in the region of 50 new errors had crept into that version, which varied from the inclusion of tracks that appear to have been made by pigs historically crossing fields, to the disappearance of land amounting to almost 300 hectares.
	Following the receipt of version seven, a visit was made to the RPA offices in Reading in an endeavour to sort out the problem, and a new version of the maps was promised within two weeks. Having heard nothing by December, the landowner telephoned the office, and a promise was made that the maps would be produced by 19 January 2006. There has been no explanation why the maps for this estate cannot be printed, save that the RPA staff said on the telephone that the computer systems were unable to cope. On 2 March this year, the estate owner received the entitlement statement dated 21 February, stating that no payment could be made by the RPA until the claim was fully validated. In turn, the claim could not be fully validated until the digital mapping queries had been resolved.
	Over that period, the problems had gone from bad to worse rather than from bad to better. What will happen if the person's map cannot be validated? There is virtual agreement between the landowner and the RPA, but it cannot be validated for technical reasons by the date on which the payment has to be made, lest the Government lose their subscription from the European Commission for failure to make those payments. In his opening remarks, the noble Lord, Lord King, sought assurances about time limits. The indications are that, because of the mapping problems, that question cannot be resolved, or at least the Minister will find it difficult to resolve the time issue, unless he knows something that we do not know and something has happened since this lot came out.
	In case it might be thought that that is the only example, which encapsulates almost every error that could go wrong, I have another one concerning someone who applied for the entry-level scheme on the environmental side in May 2005. When he got his maps back, 40 hectares of land were missing. On 27 November, it was stated that his mapping problems were nearly resolved but involved "unusual" printing, so he was told that it would take a while to complete. He phoned on 10 March to discover that the maps had been lost.
	There is a real technical problem here. The real difficulty that I foresee is that these technical problems may not be capable of solution before the date by which the payments are required to have been made under European law and practice. Heaven help the agricultural industry with having to deal with that as individuals, but the serious question for the Minister is: what happens if that finally proves to be the situation?

The Earl of Arran: My Lords, I, too, thank my noble friend Lord King for introducing this debate this afternoon. His timing is profoundly poignant. First, I declare an interest. My wife is a farmer—and a very much better farmer she is than I would ever be. Where I come from, which is on the edge of Exmoor, the sad fact is that, until the supermarkets are prepared to pay a fair price for beef, lamb and milk, the single payment will make the difference between profit and loss, and survival and extinction, and it will be what keeps the rural world going round. The disgraceful fiasco over the single payment is not only putting farmers' businesses at risk; in the north of Devon alone, it is also damaging hundreds of other small businesses that supply feed, fertiliser, machinery and 101 other goods or services to the farming community. They have not been paid because, without the single payment, farmers do not have the means to pay them.
	That situation is nothing short of scandalous. The worst of it is that it was entirely predictable. The Government chose the most complicated model of single payments that it was possible to devise. They then asked the staff of the Rural Payments Agency to implement it at the same time as threatening large numbers of them with redundancy. Finally, they relied on assurances from people at the top of the RPA, whose record has been shown to be rather less successful at delivering projects on time than the constructors of the Wembley Stadium and rather less forthcoming in their communications than the old Soviet politburo. This is probably the most incompetent piece of government administration ever known in a government department. It certainly rivals that of foot and mouth disease. It is utterly deplorable.
	Humility still counts for an awful lot. Perhaps the word "regret" as used by the Minister could be changed to the simple words: "We are very sorry. We got it wrong". However, I suspect that, as happens all too often, the Government could not give a toss for the plight of the rural economy. One day, they will deeply regret that. In the mean time, farmers the length and breadth of the country are furious and fuming.
	The Minister may blame his advisers and his civil servants all he likes, but, in the final analysis, this mess is of the Government's own making. Having cleared that up—as we hope he will very soon—as an honourable man, he should, as my noble friend Lord King said, seriously consider his future in that department.

Lord Plumb: My Lords, first, I regret that I was not here on Monday to hear the repeat of the Statement made by the Secretary of State in the other House. We have had a few days to reflect on that Statement and to express our concern about the further delay that we now anticipate. I am very pleased to be able to support my noble friend Lord King for introducing this debate about the RPA and the single payment scheme. My noble friend is a man of great political and ministerial experience. He speaks with some feeling, not just about the affairs of the countryside, but as a great politician.
	I declare an interest as a farmer and a hopeful—still hopeful—recipient of the payment under the agreed cross-compliance rules. I must tell the Minister that this is the biggest shambles and piece of incompetence that I have witnessed during my life as a farmer and my time involved in agricultural policy during the past 60 years. I could cite problems from the past, but never have I experienced the situation that we face at present. It has been clear for some time that the scheme created—I repeat, created—by the policy makers in Defra from what I believe was a very simple CAP reform when it was first issued was far too radical and complicated. It was too ambitious to expect the SPS to be implemented in 2005. The sad lack of pragmatism and efficiency has been obvious in the way in which the RPA has chosen to administer the scheme. As with many Defra projects, the IT, mapping, and so on and so forth, on which the scheme is built have turned out to be a complete shambles, in my opinion.
	I confess that I have some sympathy with some of the people who have been working during the past two years in the RPA, who themselves were totally confused and unable to cope with the very complicated procedures. I have some sympathy, too, with the Minister, who takes on a mantle that appears, at present, to be very hot indeed.
	I tabled a Written Question about a year ago asking what training people had to help by telephone those who wanted information on the operation of the scheme. I was told in a Written Answer that there was full, intensive six-week training and that there would be further training on dealing with telephone calls, perhaps from irate farmers. Therefore, when my son had a query, I asked him to phone the helpline. After three hours, and a lot of words, he asked: "What training do you have for this job?" The girl at the other end said: "We do not have any training. We are just given the book and told to get on with it". I only cite what my son said, who was trying to get an answer to a particular problem. Incidentally, he phoned the NFU helpline and told me that he had a very good and responsible reply.
	So when we hear of the numerous examples of correspondence that is flowing—very slowly—between the RPA and farmers, as the RPA tries to account for, say, 0.01 of a hectare, we must ask: where has the common sense gone? The Rural Land Register, which acts as a linchpin for the whole of the SPS, has been another farce in its failings and another cause of frustration to many farmers up and down the land.
	Why it is so difficult to map land with modern technology, of which the noble Earl, Lord Erroll, rightly reminded us? It is available and I can offer it to any local farmer who is looking for it. Why have the processes being slowed down? That is, perhaps, due to an overzealous desire for unreasonable accuracy. How can so many errors be made? Fields go missing on maps, as my noble friend Lord Dixon-Smith just told us. Whole maps go missing. There are repeated requests for land information that has already been given. I could continue by talking about various cases for the rest of the day. If the Minister doubts my word, I invite him to join me on Sunday morning and meet my neighbours—he does not live too far away—and he would hear about the rest. The list of errors is endless.
	It is estimated that the appalling delay in payments under the SPS has already cost farmers something like £32 million in England. Farmers are therefore justified in feeling betrayed by Defra, and I think they have been a lot more tolerant about a lot of this form-filling, map-checking and tree-counting than they might otherwise have been. They willingly entered into an agreement with the Government to manage the countryside to the best of their ability in a sustainable manner, in return for which they expected and believed they would get a fair price for the work to be done in an environmentally friendly way. They have begun to comply with their part of the bargain, but Defra has failed miserably.
	Supply traders are suffering as much as farmers. As we have just heard from my noble friend Lord Arran, the supply trade is, if anything, being penalised even more. Farmers will not—indeed, cannot—buy or pay for the fertilisers, seed and replacement equipment they need. The only suppliers that might be perceived to benefit are the bankers, as farmers go further into debt. I note that the Minister is likely to see the bankers shortly. That is fine, if we can have lower cost credit. The bankers will lend the farmers money, but the debts are still accruing and in an already shrinking business. There seems to be little concern for food security in this country.
	I am a born optimist, and yesterday I heard a lot of young farmers speaking at a conference with a lot of enthusiasm. But many of them are going abroad. I could name 90 young farmers who have recently gone to France to buy land because they feel that there are opportunities to start there. That is sad. Eastern Europe is making offers, and so are countries elsewhere. The key problem is the definition of the policy. We now know that Scotland and Wales have benefited very clearly from applying the historically based system, which seems to be working better for them. We would not be in this mess had we had a timetable for planning. As my noble friend Lord Dixon-Smith said, we would not be here—we do not want to be here—discussing this issue as we are having to do at the moment.
	I know of no other country in Europe where payments have been delayed as they are here. One of the young farmers told me yesterday that, for 130,000 farmers in Ireland, 90 per cent of the payment was made on 1 December. I therefore wonder whether the Minister agrees that we need a comprehensive review of Defra's entire role for the good of the whole economy, not simply for the good of Defra itself. Surely such a review must involve the whole of industry and the environment agencies. That, of course, should be led by a totally independent chairman. Even when the 2005 SPS farce is over, the farming industry must look forward to the same RPA being responsible for inspecting and enforcing much of the cross-compliance regime. Given current experience, the pragmatic and practical approach needed for inspection is sadly still missing. If the taxpayer, Defra and the farmers are to get the most from a single payment scheme, the scheme must be simplified, and the subsidies on the end product must subsequently be removed or replaced.

Lord Willoughby de Broke: My Lords, I, too, am most grateful to noble Lord, Lord King of Bridgwater, for introducing this debate at this key moment. I declare an interest as one of the 80 or 90 per cent of farmers who have yet to receive their single farm payments or their digital maps. I was very interested to hear about the difficulties experienced by the noble Lord, Lord Grantchester, and the noble Earl, Lord Erroll, in getting their farm holdings registered. I have had exactly the same experience, as has the noble Lord, Lord Dixon-Smith, so I can assume that this is a common thread running through the whole problem.
	Few of us are as surprised as Defra Ministers appear to be by the mess in which we find ourselves. It looked like an administrative nightmare from day one. The sheer volume and complexity of paperwork was always likely to end in tears. A new system, new rules, new mapping requirements, inadequate IT systems, new guidance and, as my noble friend Lord Plumb said, inadequate staff training were always a recipe for disaster, and so it has proved. It is not as though the Ministers were not warned by the NFU and industry that this would happen and that they were making a rod for their own backs by trying to put this new system in place without any sort of trial run. I do not know why the Government chose to do this instead of keeping the old IACS for a year, which I gather they are entitled to do under the CAP regulations. That system worked perfectly well, and I do not know why they did not keep it while they bedded down the IT systems, trained the staff and got the digital maps organised ready for a launch this year rather than in 2005. That would have been the sensible and practical thing to do.
	I am sorry to say that the Government ignored the warnings they were given. The Minister might be regretting the dismissive remarks he made in his Answer to a Starred Question asked by my noble friend Lady Byford on 24 January in this Chamber, when he rubbished the conclusions of the report of the House of Commons EFRA Select Committee. But the EFRA committee is absolutely right, and the Minister is absolutely wrong. Its criticisms have been proved right time and time again. I hope that the Minister will at least have the grace to apologise to Members of the House for misleading them on that occasion about the date of the final payments. I also hope he will come up with something a little more positive and will reassure farmers about the future, which is what we are looking for, rather than making too many recriminations. I am sorry that the Minister thinks that is a joke. It is what I feel; we should try to be positive about this.
	The most pressing reassurance we need, which nearly every speaker has mentioned so far, is whether it is possible to give some firm commitment to the date of payments. That is what farmers throughout the country are looking for. Will those payments be made within the June window, and what are the consequences if they are not? The consequences for farmers are of course serious, but what about the consequences for Government if they are not made within the allowed EU CAP process? As other noble Lords have asked—I know that this has been asked in the House of Commons—will the Government take responsibility for overdraft interest incurred by farmers beyond the end of March? I quite accept that the payment window was to the end of March; it moved from February to March. But farmers were expecting to be able to pay their bills by the end of March; indeed, they must have told their banks and their suppliers this. They were not expecting to incur further large overdraft interest costs. The Government repeatedly told farmers that they would receive their payments by the end of March. It is entirely the fault of Defra, not the farmers, and I do not see why farmers should be expected to carry the can for Defra's incompetence and pay penalty interest charges. Will the Minister say something about that in his winding-up remarks?
	What comfort can the Minister give to farmers whose new single farm payment application forms will come thumping through the letterbox any moment now? As the noble Earl, Lord Erroll, pointed out, it will be extremely difficult—impossible, in fact—for them to fill those in accurately because we do not have accurate digital maps.
	It is true—again, the noble Earl, Lord Erroll, is absolutely right—that the digital maps will trigger everything. At the moment, the current forms which are coming through have to be fully and accurately completed by 15 May. Is that still Defra's deadline for the completion of these forms? If so, will it consider moving the deadline? How will it advise farmers to fill in the new forms when they do not have accurate maps on which to base their areas? The question of mapping is central to the whole problem. I should like to know whether the date can be moved and how farmers are to fill in their new forms. It may be beyond the possibility or the remit of the Government to move the date. It may be that they are acting as an agency for the agricultural directorate in Brussels and that Defra is simply a creature of the Brussels directorate. We would be much better off running our own agriculture, as this shambles has shown.
	The noble Lord, Lord Plumb, said that we need a review, and I believe that the Secretary of State, Mrs Beckett, has said that she would be carrying out a long-term review of the Rural Payments Agency. Of course such a review is badly needed, but asking Mrs Beckett to carry out a review of the RPA is rather like asking King Herod to carry out a review of the future of male babies. It does not make sense at all. What we need now is not a long-term review but short-term action and reassurance. I hope we will get that when the Minister comes to wind up the debate.

Lord Livsey of Talgarth: My Lords, I am grateful to the noble Lord, Lord King of Bridgwater, for introducing the debate, which is of absolutely crucial importance. I declare an interest as a life-long agriculturalist and as an applied agricultural economist. Indeed, I am not happy to be here today because this evening I am supposed to be with Brecknock Young Farmers, of whom I am the immediate past president. I am designing with them a competition whereby they initiate and innovate new farm enterprises—for which they will have to keep records and produce cash flows—to win the competition under the expertise of two judges. I shall be giving a cup for that. I cannot get to the meeting because it is too far, but I can assure the Minister that I shall be there before the end.
	This is a massive crisis for English agriculture. As we have heard, £2.9 billion is owed in single farm payments and yet, as far as I can see, the payments are flowing only in hundreds of millions a week at the present time, and only £1.1 billion has been paid to date. I am sure the Minister will correct me if my figures are wrong. I know what the situation is in Wales but I am on a learning curve as regards England. I apologise for not being here on Monday when a Statement was made. This was because the chairman of the Select Committee on agriculture and the environment wanted me to make a visit for a nuclear investigation study.
	We understand that 96 per cent of the payments may be made by 9 June, when the original target was the end of March. As we have heard in the debate, the legally binding EU deadline is 30 June. From previous Questions that have been tabled and discussed with the Minister, as far as I can establish there are about 120,000 applicants for single farm payments in England. This really is a huge crisis, and we have heard about the sacking of the chief executive of the RPA.
	In my view, from my long experience, I believe that when you put IT into agricultural systems, unless you have exact parameters and people who have genuine knowledge of operating the system, it usually ends up with a shambles. The Government have introduced a very complicated system, which appears to be an IT nightmare. As we know, mapping is a major problem, and has been for some considerable time. It took some while to sort out the IACS mapping at the time it was introduced. The impact of all of this is a cash flow crisis for the farming industry as a whole, and an enormous one for individual farming businesses and farming families.
	In Wales, we had a payments crisis of much smaller proportions about five years ago. I can tell the Minister that civil servants worked weekends, cheques were signed and part payments made. Some of the deadlines were indeed missed, but at least the payments were sent out and the farming families received their money. The Welsh Assembly after that decided to take in-house responsibility for agriculture. Many of the responsibilities have been transferred to Wales from Defra, and we welcome that.
	But this situation has consequences in practical terms for individual farming businesses. This is springtime and, as we know, in cash flow terms, farmers have had to buy their seed, their fertiliser and many other commodities on which they will not see a return—certainly in arable farming—until the autumn. Indeed, that is a normal consequence. In livestock systems, it often takes 12 months for the money to turn over. These are facts within agriculture which no one can deny, given the biological sequences involved.
	The dynamic hybrid approach has been applied here when a simpler approach could have been instituted with a one-year delay, and, in my view, it is an enormous error of judgment that Defra did not take advantage of that. This is not being wise after the event. It must be terrible for Ministers to be lectured by people saying, "I told you so". We are not saying that in this debate. But certainly at the time when both Wales and Scotland chose the historical basis, we took into consideration that these were mainly livestock countries and 80 per cent less favoured areas, and we have been right all along in choosing that system. In spite of criticisms which have come across this Chamber from time to time, we took the right decisions. Those of us engaged in agriculture and agricultural policy were horrified at the system that has been put in place in England.
	The problems have been graphically outlined in the debate. The result, of course, will be bankruptcies—there have been bankruptcies already—of farmers, suppliers and rural businesses as a whole. We must solve the problems as soon as we possibly can. Certainly if I was in the Minister's position, I would be trying to do something about making 50 per cent entitlement payments immediately to all who are qualified to receive them. This surely should be easy with a 90 per cent historical element in the payment and only 120,000 farmers involved at the other end of the payment. It should not be a big problem in my book.
	Single payments have, of course, been made in the rest of Europe. Let me give the Minister some figures. Certainly in Scotland and Wales, it is over 90 per cent; in Ireland it is 98 per cent, so it has improved on the figure given to us by the noble Lord, Lord Plumb; Austria, 100 per cent; Belgium, 100 per cent; Sweden, with a hybrid system, 90 per cent; Germany, with another hybrid system, 80 per cent; and Denmark, 98 per cent. Certainly we have not seen any riots from the farmers in France in recent days so things must be all right there, too.
	Who is to blame? Clearly, there is Accenture, the new computer company, and of course the RPA. Over Defra we should perhaps put a question mark. Is it actually Defra's fault when a stand-alone agency has been in charge? My colleague Roger Williams, who succeeded me in Brecon and Radnorshire, said yesterday in the other place that
	"The new firm was given the challenge of dealing with a new scheme. During our inquiry"—
	that is, the agriculture Select Committee inquiry into the RPA—
	"the hon. Member for North-West Leicestershire . . . and I were told that DEFRA changed the details of the scheme 60 times between initiating the contract and finalising the scheme. At its heart, the problem lies with DEFRA as well as . . . Accenture and the RPA".—[Official Report, Commons, 28/3/06; col. 298WH.]
	I am sure that is quite right.
	My noble friend Lady Miller asked what part the RPA ownership board has played over the past six months, chaired by a Defra civil servant. What was the executive review group doing concerning the RPA during the autumn, and what advice did it give the Minister? We are stuck with interest charges now—£25 million to date, so far as I can establish—because of the delays in the single farm payment.
	Finally, for the past 20 years we have not been in a resigning culture, and Ministers no longer resign. Politically, that is not on the radar screen these days. They do not resign over things for which they are responsible; that is a regrettable fact for both parties in government. No one in the Conservative government resigned over BSE, when in my view they should have done. I have a great deal of sympathy for the Minister, so I hope that he is listening. He has inherited the RPA problem, and I know that his predecessor was concerned about the application of the single farm payment system in England. Both Ministers were and are honourable men. I believe that they have been let down by the Rural Payments Agency. As the noble Lord, Lord King, said, the problem required hands-on expertise. In my view, Ministers should have put an agriculturally qualified trouble-shooter in to sort it out months or years ago.
	I am not asking the Minister to resign but if I, as a practical agriculturalist and an applied agricultural economist, had been in charge throughout the period since the system was initiated and seen the whole thing through, I really believe I would be resigning today. I know that farmers desperately need SFP cash now so I plead with the Minister to authorise interim payments now, which would save farm businesses and farming families. The supermarkets have had more than their pound of flesh from farmers through their ruthless cost-cutting. Will the Minister prevent his own RPA from finishing off the job, and the rest of the farming industry, though incompetence? Please, act now and save the day.

Baroness Byford: My Lords, I thank my noble friend Lord King of Bridgwater for securing this short debate this afternoon. Like other noble Lords, I take no joy in our being back for the second day in your Lordships' House this week to debate the Rural Payments Agency. The Minister smiled when we said it, but it is meant genuinely. We would all much rather have seen a smooth transition from the old system to the new single payment system. All of us regret the circumstances that farmers find themselves in through no fault of their own. Frustration, anger, deep anxiety and stress are being borne by many—with, to date, inadequate answers to the questions that they raise.
	In his introduction, my noble friend Lord King asked where we are going, since many family farms are under severe stress. He raised the issue of tenant farmers, and their obvious regard to having to pay rents that are due within the next couple of days. The question of bank overdrafts was raised; I can tell the noble Lord, Lord Desai—to whose contributions I always listen with great care—that many of them are already up to their limit. That is the problem. On the key target that my noble friend mentioned concerning the Rural Payments Agency, it was said that 96 per cent of the bulk would be paid. Warnings were given when that dynamic hybrid model was chosen with a very tight delivery date.
	I should remind the House of our family's farming interest and of my involvement with several rural organisations such as the RSIN, the RABI, the NFU, the CLA, the Countryside Alliance and the National Trust—to name but a few. They are constantly fielding questions from distraught farmers. My noble friend Lord Inglewood is disappointed not to be taking part in the debate. Since he has such a direct interest, regardless of the intrinsic merits of the current system, he felt that it would not be right or appropriate for him to take part. I am glad—oh! The Minister says, "What about others?". If none of us was speaking, how would he know what was actually going on out there?

Lord Bach: My Lords, I wonder what the difference is between the noble Lord, Lord Inglewood, and others with an interest in this field.

Baroness Byford: My Lords, that is for my noble friend Lord Inglewood to decide. I cannot, as he is not here. The Minister will have to be patient and ask him himself. There were no speakers on the government Benches except for the noble Lord, Lord Desai, and the noble Lord, Lord Grantchester—whose contribution, raising his very relevant problems, was well worth having. If the Minister is saying that people speaking on behalf of other parts of the House—from the Cross Benches or Liberal Democrat Benches as well as the Conservative Benches—should not speak, my goodness, heaven help the farmers. The Minister has been ruffled before he came in, which is a shame as I hope that I will be helping him along his way.
	The noble Lord, Lord Livsey, referred to the figures achieved by other countries. I, too, would like to highlight three of them. If the Minister wishes to listen, he can. If not, it does not matter for I will continue anyway. The truth is that Sweden moved to a hybrid system and 90 per cent of its farmers were paid on 2 January, while Germany used a dynamic hybrid system and 80 per cent of its farmers had received theirs by December. In Denmark, where there is the other hybrid system, 98 per cent of farmers were paid to date. If those three countries can do it, it begs the question: why not this one? What have we set out to do that was not done in other countries? When the Minister comes to respond, perhaps he will tell us.
	Other noble Lords have highlighted specific areas. The noble Countess, Lady Mar, highlighted the management of this problem and the failure to resolve it. My noble friend Lord Plumb said, quite rightly, as others have done, that the frustration and delay involved in trying to contact the helpline—you would think that you would get an answer from a helpline—has been beyond belief. Common sense should have kicked in. Other noble Lords quite rightly highlighted the difficulty that the supply trade and other suppliers have. I support the call for an independent review.
	I understand that the noble Lord, Lord Bach, had a meeting with the industry yesterday in which they discussed where we are and where we are going, and I seek clarification on some issues. I shall not repeat what I said on Monday, but it still stands.
	I understand that numerous validation schemes had very small errors—indeed, some were tiny. It has been suggested that claims for less than two hectares or up to 3 per cent of the area, whichever is the lower, would be paid. Will the Minister confirm that? I understand that the agency will be paying the middle range of claimants. What does he define as the middle range?
	The centralisation of the mapping work has been returned to Reading. There is a move afoot for one person to be responsible for individual claims from farmers, which will ideally be linked up with a person at Reading. How will that be achieved? Many of these claims have been dealt with in other agency buildings around the country. Are the Government saying they will all be moved to Reading? How can there be mapping alongside one person at the same time and the same place?
	I understand that the contract work for the mapping will be recalled. Again, I would be grateful for clarification. I also understand that there may be a ban on RPA staff giving out their personal phone numbers to applicants so that they can get a quicker result to their inquiry.
	It is possible that some of the redundant quality checks will be set aside, which should free up extra staff. Can the Minister confirm that there will be a direct push on the conclusion of the mapping? How far has the agency got with its mapping exercise? How many of these outstanding claims—and our family farm is invalidated—are due to insufficient mapping detail? I would be grateful for clarification. I also understand that there is a problem with dual claims. Will he tell us more about that and how it can be overcome?
	It has been suggested by some noble Lords and by others outside that if this will take too long, historic payments which were originally due through the IACS claims should be paid first. On the whole they are already agreed, although under this new system there are still queries. It has also been suggested that the claims of people who were not entitled to payments before should wait until the others have been dealt with.
	One of the reasons for things going really wrong was, as noble Lords have suggested, that this country adopted a very complicated system. During a noble Lord's speech, the Minister indicated that our party agreed to this. I remind him, as I have done before, that Hansard shows that I warned at the time of the difficulty of choosing different systems, even within the UK. I said that in Wales, Scotland and Ireland—particularly Wales and Scotland—it would be different, which could have repercussions. I also raised the question of competitiveness with our EU colleagues. These things have happened not by mistake but because a conscious decision was taken.
	I hope that the Minister, having listened again to the many issues that have been raised, will deal with them constructively and answer some of these pressing questions. I have not attacked him; I said what I said on Monday. He is indicating that my noble friend Lord King did attack him, and I think he was quite right so to do. I have not attacked the Minister; I have given him some concrete suggestions, and what I seek from him, for the good of everybody, are some concrete answers.

Lord Bach: My Lords, I congratulate the noble Lord, Lord King, on securing this debate—or perhaps I should congratulate the noble Baroness, Lady Byford, on securing it and inviting the noble Lord, Lord King, to make one of his occasional visits to the Front Bench to give us a House of Commons speech which I found quite unfitting for the way in which this House normally approaches these issues.

Baroness Byford: My Lords—

Lord Bach: My Lords, I would much rather not give way. I have a lot to say in my 20 minutes. When I have finished trying to answer the questions that the noble Baroness and others put to me, I will happily give way.

Baroness Byford: My Lords, does the noble Lord—

Baroness Farrington of Ribbleton: My Lords, my noble friend does not have to give way at this stage. He indicated that he will give way when he has finished speaking. I ask the noble Baroness to be patient.

Baroness Byford: My Lords, I wanted to say that a mistake was made. I was not going to move the noble Lord, Lord King, from the Dispatch Box in the middle of his speech. It was an error.

Lord Bach: My Lords, what was the error? Was the error in inviting him to open this debate, or was it in inviting him to the Front Bench?

Baroness Byford: My Lords, I was quite happy for the noble Lord, Lord King, to move this debate. The mistake arose because he would normally have done so from his place, as does everybody who moves a debate. There was an error. He came from behind the Dispatch Box; he had already started speaking; and I certainly was not going to interrupt him.

Lord Bach: My Lords, I am grateful to the noble Baroness for that explanation, if that is what it was. I have congratulated the noble Lord, Lord King, on securing this debate. A number of very important points have been raised on this very topical and important issue. I will address them as best I can.
	The focus of the debate is the Rural Payments Agency. It was clear from many of the contributions today that a large number of concerns centred on one aspect of the agency's work; namely, the implementation of the single payment scheme. Perhaps I may take a few minutes to put the introduction of that scheme into context.
	In June 2003, the EU Council of Agriculture Ministers agreed what amounts, frankly, to the most important reform of agricultural policy in generations. Key to the reform was the introduction in 2005 of the single payment scheme, which gives farmers greater freedom to meet the demands of the market by decoupling subsidies from agricultural production, and helps reduce the negative impact of farming on the environment by removing artificial incentives to maintain production and introducing a new regime of cross-compliance. At last, we have started to get rid of the curse of constant subsidy. I cannot help but point out that none of this happened under the previous administration, who claimed to be so much on the side of the farmers. No reform was even attempted of the ridiculous system which had prevailed for much too long in these islands. It is not hard to guess why they did not seek reform in this area.
	After the disaster of foot and mouth, such reform of the CAP was a key recommendation of the Curry commission, and it lay at the heart of our strategy for sustainable farming and food. In truth, we are only at the start of this transformation, but we need to see it through if British farming is to have a future. The difficulties which we have encountered with this year's payments are, sadly, a distraction for many in the farming industry who would otherwise be focusing on modernising their businesses. That is important.
	The economic benefits to the UK farming industry of introducing the SPS are estimated to amount to some £100 million during the next few years as a result of improved market orientation and removal of many of the rules and distortions associated with production-linked subsidies. Importantly, the new scheme also simplifies the subsidy system by consolidating 11 previously separate CAP payment schemes into one, thereby contributing to a real reduction in paperwork for farmers once the system beds in.
	Many noble Lords compared the model of the SPS that Ministers have chosen to implement in England with that chosen in Wales and Scotland. They were right to say that we have adopted a different system in England, but I would describe it as being more sustainable and modern rather than more complex, as some others have described it. I agree with the spokesman for the Opposition in another place who said on Monday that the Secretary of State,
	"decided, rightly, to introduce a complicated hybrid scheme".—[Official Report, Commons, 27/3/06; col. 545.]
	Is that still the view of the Opposition three days later? If it is, it did not come out in any of the contributions from the Front Bench. I assume from this that the Opposition support our decision to introduce such a scheme, but I could be wrong about that. After all, this modernising move was long overdue after the minimal efforts they made to make the industry more sustainable during their 18 years in office.
	By contrast, Scotland and Wales have chosen to use a historic system to make payments. Under it, farmers continue, now and for the future, to be paid on the basis of what was received by someone farming the same land between 2000 and 2002. That appeared to us, and no doubt to the party opposite, to be neither beneficial in reconnecting farmers to the market, nor something with which taxpayers or farmers would be content for long. If we accept the principle that subsidies should not be linked to production—I hope that all parts of the House do—it is both unfair to farmers and unjustifiable to the general public to make future payments on the basis of crops and livestock that farmers had five years ago. There are indeed already rumblings in member states that have maintained the historic system about how unsatisfactory it is; and that dissatisfaction is bound to increase as time goes by.
	Comparisons about the timing of payments in other parts of the UK must also take into account the vastly differing number of claimants that each country has received: 120,000 in England compared with 22,000 in Scotland and 18,000 in Wales. I am surprised that there has been no mention of that point in the debate. Much has been said today about the payment timetable in England. The flat-rate model was chosen by Ministers only after a full consultation was carried out. It also followed advice received by Ministers at that time from the RPA that the introduction in 2005 of the SPS model chosen was achievable. At that time, stakeholder representatives and Ministers were greatly reassured. Indeed, as I understand it, it was the Opposition's belief that 2005 was the right date to start making the payments.
	It was always known that there might be a risk of European regulations changing—as indeed they did several times during 2004—to the extent that it might affect the payment timetable. As a result, the RPA announced in January 2005 that the most likely date for the first payments to be made would be February 2006. Payments under the single payment scheme indeed began—despite committees elsewhere saying it was unlikely to happen—on 20 February this year, and entitlement statements were sent out to all but 1 per cent of claimants soon afterwards to allow trading to begin.
	As I made clear to the House on Monday, and I want to reiterate it as clearly and firmly as I can, Ministers fully share farmers' concerns about the current problems and understand the distress many of them feel. After 20 February, Ministers had expected and been led to believe that more payments would have reached farmers by now than has been the case. It was only late in the afternoon of Tuesday 14 March that Ministers were first told by the RPA that the bulk of SPS payments would not be made by the end of March. We greatly regret that this situation arose.
	Several Members of the House have asked whether the Government would consider compensating farmers for late payments. As I tried to explain on Monday, payments, while later than any of us would like, remain well within the payment window specified in the relevant European regulations, which give us until the end of June 2006 to make these payments; hence the question of compensation does not arise. We are also acutely aware of the fact that, under the old CAP subsidy schemes, farmers would potentially have received payments at different times of the year, while the single payment scheme is just that—a single payment. Indeed, this is one of the main reasons why we made the announcement over 12 months ago, so that farmers would know that payments would not start until February.
	We know that the change in the timing of payments has caused difficulty to a number of farmers as they adjust to the new scheme, which is why I have been in regular contact with the leaders of the farming industry, their suppliers and their bankers. I have met all these groups in the past 24 hours, and I talked this morning to the Agricultural Industries Confederation to update its representatives and, more importantly, to hear their views on the current situation and their perspective on how matters are affecting their farmer customers.
	I have to say that, as far as one can be in this situation, I was encouraged by the message that I took from my meeting with the banks this morning, and indeed from discussions with the NFU, CLA and TFA yesterday morning. There have been no difficulties in securing loans up to the level of the expected payments and none of the unions involved, nor the banks, nor the AIC, knew of cases of bankruptcy that have followed from the fact that we are not going to meet the bulk of payments by the end of March. I do not say that there will not be any, but there are none now, and it is not right to scare on the basis that there have already been some. The issuing of entitlements statements, even where not fully validated, has helped in that respect. In the same vein—and I repeat this, because it is important—I was told unequivocally by the banks that no viable farming businesses are failing as a result of single payment issues.
	The situation we found ourselves in when the RPA reported its revised assessment of the situation on 14 March was simply unacceptable. That is why we supported the decision of the Permanent Secretary to replace the then chief executive of the RPA with Mark Addison, a senior civil servant with outstanding experience and abilities, and charged him to come forward urgently with a report on the steps needed to get us back on track. The RPA still faces a significant challenge in getting SPS payments out to farmers, and I know RPA staff are doing their best and working all hours that God sends. But speeding up these payments—consistent with our responsibilities in handling public funds—remains the overwhelming priority of Defra Ministers.
	Noble Lords have asked questions on the detail of the steps being taken to speed up payments. There have also been some questions on the detail of the RPA's administration of the scheme, particularly mapping and the IT system. On the question of mapping, since September 2004 there have been more than 100,000 requests for new land to be registered or for boundaries of registered land to be amended. In the past five months alone around 45,200 holdings have had fields mapped, and as at the week ending 24 March around 5,000 holdings were awaiting one or more fields to be mapped. The Rural Land Register now comprises some 2.1 million land parcels, and by area is estimated to be approximately 98 per cent complete for SPS purposes. The remaining 2 per cent of incomplete cases are generally where farmers have still to provide maps. Their land will be digitised but their payment may be delayed, because until it is digitised it is not valid for payment. The new acting chief executive realises that mapping is one of the considerable problems, as many noble Lords from all parts of the House have stressed today, and he is taking a close personal look to see what can be done to improve the mapping process. Any advice from noble Lords on that important issue would be very welcome.
	The development of the Rural Land Register is a significant achievement. It will be used widely within Defra not just for processing single payment scheme applications, but for other schemes such as environmental stewardship.
	On IT issues, the noble Countess, Lady Mar, asked a question on Monday about computer crashes and lost data. Expanding on the answer that I gave, I emphasise at this point that the RPA is satisfied with the performance of its SPS IT system. To progress payments, the RPA is utilising the system for 15 hours per day during weekdays, and up to eight hours per day during weekends. However, it is sometimes necessary to temporarily stop the processing of individual claims so that the system can carry out certain automated system-wide tasks such as identifying which claims are now ready for payment or have completed certain validation procedures. As I said on Monday, all the main IT systems are in place and have produced the entitlement statements and first payments as planned. However, we also know that it has not been possible to ramp up the validation and distribution of payments as planned.
	The key objective for the acting chief executive is to identify the problems and develop and drive forward the plans to overcome them. He has identified several actions, some of which I outlined to the House on Monday, which would enable us to speed up payments without losing sight of the need to properly manage the disbursement of a large sum of public money.
	There is no question of the UK Government receiving interest on this money. It belongs to the EU, and is then transferred to us to hand on to farmers. There is no question of it being in UK Government bank accounts where interest can be gained. I hope that once and for all that canard can be put to rest.
	The acting chief executive has removed disproportionate checks from the payment authorisation system to speed up the payments; prioritised work on validation of claims to release the maximum value of payments as quickly as possible; centralised key mapping work; and strengthened the RPA's capacity in key areas. Those were initial steps. He is now, with the strong support of the Secretary of State, taking the following steps. He is reforming RPA processes to deliver customer focus by dedicating teams of staff to work on individual claims in the entirety, rather than the current task-based approach. Also as part of that change—and this is significant, as noble Lords with experience of this may appreciate—processing staff will be allowed to phone applicants directly to work through any outstanding issues. A discrepancy tolerance of two hectares or 3 per cent, whichever is the lower, will be implemented for validation of claims. That is also important. There has been too tight a process with regard to small pieces of land.
	Redundant quality checking processes will be stopped to allow staff to work on claims processing. People doing the mapping work will be joined up with those actually processing claims in the same office. Where mapping correspondence is outstanding—and we all know examples of that; we have heard about them today—payments will be made on the basis of the information the agency has. A senior manager will be appointed to take delivery of the 2006 claims processing, which we cannot forget.
	In his initial assessment of the reasons for delays, the acting chief executive has not identified lack of overall staff resources as a concern for the completion of the 2005 SPS statements. In addition to these steps I can also announce today, after receiving representations about the need to provide more time for farmers to notify transfers of entitlements in order for the transferee to claim on them under the 2006 scheme, that we are arranging for the necessary changes to be made to both EU and domestic legislation. In practice that means the deadline will be moved back from 2 April to 23 April, an extra three weeks. While that may not be the most major thing the House wanted to hear today, I hope it will be considered an important step.
	I shall quickly try and answer some questions. The position of the ex-chief executive is that he is on paid leave of absence until the department is in a position to determine and agree the terms of his departure. There is all-party support to introduce the new scheme in 2005 to help modernise the industry. We only went ahead with it after the RPA advised that the task was achievable. The noble Lord, Lord Plumb—whose contribution to these proceedings I always listen to with great care—will know, although this is not what he asked for, that there is to be a thorough examination of the RPA to see whether the agency is generally functioning in the way it should. That review is starting now.
	Like the noble Lord, Lord King of Bridgwater, when he was a distinguished Minister, I too am a hands-on Minister. I have, for good or bad, spent a long time over a number of months talking to the RPA and listening to what it has to tell me about what progress was—or was not—being made. I have to tell the House that it was not until Tuesday 14 March that we learned that the bulk of payments would not be made in time. This is from a standalone agency of the sort that was the model for the Conservative government from 1979 to 1997. What are Ministers supposed to do when they get advice of that kind? We checked, checked, and checked again. There has never been any complacency; there was continual challenge. Our priority was to see payments made. Until 14 March, the advice given in the face of continuing ministerial challenge was that the bulk of payments could—and would—be made on schedule. The RPA is an arm's-length delivery agency, and Ministers are reliant on the advice received from it. We understand our responsibilities. The government of which the noble Lord was a distinguished member was not noted for its resignations, the noble Lord, Lord Carrington, being a very honourable exception. Perhaps the noble Lord would name a Minister who resigned over the BSE farce?

Lord King of Bridgwater: My Lords, I start with an apology. Old habits die hard: I realise that I should not have spoken from this Dispatch Box, but perhaps that is a matter for this side of the House and nobody else. I apologise for any embarrassment caused.
	I thank all the noble Lords who have taken part in this very serious and most unwelcome debate. The noble Lord, Lord Livsey, and my noble friend Lady Byford both made the point that nobody wanted to be here; I certainly did not, but this issue cannot be ignored. There was no mention of the Rural Stress Information Network today but, as the Minister will know, it was mentioned in the debate yesterday. The right reverend Prelate the Bishop of Hereford chairs one branch for four counties. The network has seen a huge increase in the number of calls and, tragically, the suicide of somebody facing financial problems. None of us makes any apology for raising these issues.
	I am very grateful to the number of noble Lords who have spoken with great experience—and, indeed, personal experience—including the noble Earl, Lord Arran, who spoke of the problems in Exmoor, a place that I love and used partly to represent. The noble Lord, Lord Grantchester, spoke with great authority on the dairy industry in particular, as well as other aspects of agriculture and the problems that people are facing. He brought up the issue of mapping, as did the noble Earl, Lord Erroll, and the noble Lords, Lord Dixon-Smith and Lord Willoughby. Clearly the mapping issues that have arisen are a real impediment, as I understand it—although I am unfamiliar with some of them—to the Minister being able to resolve the current crisis quickly.
	I would like to query one point made in the Minister's speech. This is where the noble Lord, Lord Desai, with his economic background, may be able to help. I have never heard of £1.5 billion being transferred from one organisation to another without anybody making any attempt to earn interest on it. It may be my economic illiteracy, but this must, presumably, reduce the Government's borrowing requirement; it must make some contribution to the economic world. The noble Lord, Lord Desai, is much better qualified to tell me whether I am right.

Lord Bach: My Lords, the money remains with the EU—with the Commission. If anyone makes money out of it, it is that body, not the UK Government.

Lord King of Bridgwater: My Lords, I understood from the Minister's contribution that the money had been transferred, but, if I am incorrect, I am grateful for the clarification.
	I also pay tribute to the contribution of the noble Countess, Lady Mar, who, with her obvious personal and considerable interest in the matter, asked very pertinent questions. Above all, I think that the whole House recognises the quite exceptional experience that the noble Lord, Lord Plumb, brings to these matters and to which the Minister paid tribute. I am very grateful to the noble Lord for taking part in this debate, because he speaks with such enormous authority and experience on these matters.
	I asked one question of the Minister and I think that I know why he would not answer it. When are these payments going to be made? I understand that some people in the industry say that this may raise false expectations. He said one interesting thing in his contribution: that as the window existed until the end of June there would be no question of any compensation. The indication for some people listening to that remark would be that all payments would be made by the end of June. If I am wrong in that, he might like to correct me, but that would be the implication.

Lord Bach: My Lords, we very much hope that all payments will be made by the end of June, but I am not prepared—because there have been too many easy forecasts in the past—to give a guarantee of any kind. We did not appoint the new acting chief executive to give us the sort of forecasting that Ministers and others might want to hear if that was not based on solid fact.

Lord King of Bridgwater: My Lords, I am grateful for the statement that that is what the Minister now hopes to see, because we have not had that in the various exchanges in the other House and here until now. It will certainly be an encouragement to the industry.
	On the agency, the Minister has made a brave speech. I understand entirely that he has been put in a very difficult position. Somebody else chose this system. He was then given the task, late in the day, of seeking to see it carried through. However, his Government set up the agency. When the agency was set up—it was discussed in another place yesterday—the Minister was Elliot Morley. He was specifically asked who was accountable. He said that the chief executive had the initial responsibility, but that the ultimate responsibility and accountability lay with Ministers. That was at the time when this Government—to which the Minister belongs—set up the agency.
	We have just heard the Minister announce a number of perfectly sensible improvements, which he hopes will speed up the process. What this is all about and what I do not understand—what so many people up and down the country do not understand—is how it is possible that, two weeks before the date on which most of the payments should be made, somebody decides that it will be another 14 weeks before that can be done. I cannot understand how questions were not asked, and how there was not some examination. The charge for the Minister is: why were those questions not asked? How could that happen?
	We have discussed this matter fully. It is a tragic situation and, like the whole House, I hope and I pray that the damage will not be as great as many fear that it might be. I beg leave to withdraw the Motion for Papers.

Motion for Papers, by leave, withdrawn.

Films (Definition of "British Film")Order 2006

Lord Davies of Oldham: rose to move, That the draft order laid before the House on 15 February be approved [19th Report from the Joint Committee].

Lord Davies of Oldham: My Lords, the order modifies the definition of a British film contained in Schedule 1 to the Films Act 1985. The Government's aim in promoting the order is to obtain sustainable production of culturally British films, ensuring that film continues to play an important role in British cultural life, expressing and representing British culture and national identity. This aim is supported through encouraging the production of films that might not otherwise be made, promoting sustainability in British film production and maintaining a critical mass of UK infrastructure, and creative and technical expertise, to facilitate the production of culturally British films.
	Under the existing structure, to be certified as a British film by the Secretary of State for Culture, Media and Sport under Schedule 1 to the Films Act 1985, a film must meet the following requirements: the "maker" of the film must be resident in an EEA member state throughout the production of the film; 70 per cent of the total film production expenditure must be incurred on activity in the UK; 70 per cent of the labour expenditure must be incurred on labour or services of EEA or Commonwealth citizens or residents; and the film must not have more than 10 per cent archive footage from previously certified films or other makers' films, unless the film is a documentary.
	Under the proposals in this order, the "maker" and archive footage requirements remain the same. However, for consistency with film tax relief, the "maker" test will now be amended to reflect the provisions of the Finance Bill. The changes proposed by this order are to remove expenditure requirements on labour and film production activity and to introduce a new points-based cultural test. A regulatory impact assessment has concluded that these amendments will not impose any extra burden on the industry or the Civil Service. Schedule 1 to the Films Act 1985 is being modified to introduce a more effective way of certifying culturally British films and of ensuring that the support given to films is consistent with the European Commission's rules on providing state aid.
	The cultural test itself has been developed in consultation with the industry to be a simpler and more objective system for film makers, offering them much-needed certainty. The test is widely welcomed and supported by the industry. It awards points for the cultural content of the film, for where the film is made and for who makes the film. The general cultural test is set out in paragraph 4A of Schedule 1 as modified by this order. Paragraphs 4B and 4C set out separate tests for documentary and animation films respectively.
	Responses to the consultation on the cultural test called for separate tests for animation and documentary films, in recognition of the fact that the unique film-making processes used by these genres of film are not catered for by the general test; for example, documentary films spend a considerable amount of time in research and development and so, for documentaries only, points can be awarded for the specific area of work.
	To pass the cultural test, a film will require 16 points out of a possible 32. There are three sections to the cultural test. The first section assesses whether the content of the film is British, such as whether the film depicts a British story and has British characters. The second section awards points for where work on the film has taken place; for example, the use of UK studios or locations and UK-based visual effects facilities. The final section looks at who has worked on the film and whether they are British or EEA citizens or residents. A voluntary system of interim approval will also be introduced for Schedule 1 films. That will offer more certainty to film makers who want it and help them to secure financing to begin making their films.
	The fact that 15 of the points are allocated to where the film is made is a response to the overwhelming view from consultation respondees that greater weight should be given to this section than to the others, so as to incentivise the use of UK talent and facilities and to build a sustainable British infrastructure for film making. Visual effects, in particular, are eligible for more points, as this is the biggest below-the-line spend for large budget feature films, and the UK's facilities are world leading and need to be incentivised to meet increasing competition from overseas.
	Following the consultation, the test was also amended to recognise the role of the producer and the entire cast and crew. In addition, the test now awards points for key creative roles as recognised by BAFTA. The final framework of the cultural test was published by DCMS alongside the Treasury's announcement of revised and more generous rates and levels for the new tax relief for film in the Pre-Budget Report on 5 December. The final elements of the new film tax relief for film were announced in the Budget last week, including a reduced minimum UK expenditure threshold, which will allow a wider range of films to qualify for the new relief. This news was well received by the film industry. Accordingly, I beg to move.
	Moved, That the draft order laid before the House on 15 February be approved [19th Report from the Joint Committee].—(Lord Davies of Oldham.)

Lord De Mauley: My Lords, I thank the Minister for introducing the order and for his explanation. We are sympathetic to what he says. We support any measures that improve the definition of what constitutes a British film and we are glad that the Government have fully consulted on this matter and have come up with something that is acceptable to so many of those involved. The cultural test appears to be an improvement on what went before and we hope that it will help to support the British film industry to yet greater success.
	We understand that the Government's view is that the new test is simpler than the old one, despite how it may appear to the layman on paper. Anything that allows the film industry to spend less time filling in forms and calculating tax credit, rather than making films, is to be welcomed. I hope the order achieves just that. The Government's record in this area has not always been what one would hope, with confusion over future tax incentives before the pre-Budget announcement on 5 December last year contributing to a significant fall in production levels.
	We are also glad that the Minister in the other place was able to reassure my honourable friend there that implementation of the new test would require no extra resources, so at least it will not make the department's headcount reduction exercise any harder than it might have been. We hope that the order achieves what it sets out to do and that the new test is a success.

Baroness Bonham-Carter of Yarnbury: My Lords, I, too, thank the Minister for bringing forward the order. The British film industry has a lot to be proud of, as a major part of our creative economy and a valuable means of representing Britain to the world. The people who work in it are a great national asset. Here I declare an interest, because my cousin is Helena Bonham-Carter, whom I believe to be one of those great national assets, as is the noble Lord, Lord Puttnam—at least, before he went into politics.
	The British film industry is one to support. We welcome the announcement of a new tax credit system and the fact that it is designed to help smaller-budget films. Certification as a British film is the main gateway to that tax relief. Like the noble Lord, we welcome the introduction of a cultural test designed to ensure that certified films have greater cultural value for Britain and that any investment develops a broad range of skills in the domestic industry.
	However, I have a couple of queries. There is concern that the practitioner section of the test potentially overemphasises the importance of key personnel. Only two points are awarded for the majority of cast and crew, compared with 11 for directors, producers, lead actors and department heads. That seems slightly at odds with the stated goal of,
	"maintaining a critical mass of UK infrastructure, creative and technical expertise".
	We welcome the fact that the Chancellor last week reduced the percentage that a film would be required to spend in the UK to qualify for tax relief, from the previously proposed 40 per cent to 25 per cent. However, we think that the narrow definition of UK expenditure—namely, that it applies only to money spent within the UK rather than on UK elements abroad—has potentially negative consequences for co-production deals. Co-production deals are more often than not vital to secure sufficient capital for lower-budget and independent British films. This often means that British talent, making what are clearly British films, shoot them abroad. The present definition of UK expenditure will make it hard for such films to achieve the requisite UK spend for tax relief. Also, I believe that tax relief will not be permitted on the wages of British cast and crew shooting abroad. That seems to conflict with the stated aim of the DCMS for the cultural test, which is:
	"The flexibility of the new system will allow producers to clock up points if they use UK content, facilities and personnel, but is not intended to penalise them if they look to source some of their film making outside of the UK".
	It seems that a film could pass the cultural test for classification as a British film but not have any expenditure that qualifies as UK expenditure under this definition. The Government's goal of a sustainable film production sector is laudable. We worry that this one definition has the potential to undermine its good work. With those questions, we are happy to support the order.

Lord Puttnam: My Lords, I add my voice to those congratulating the Government on what is a thoughtful way forward, but I will try to offer a little context and maybe one recommendation.
	The points system is just the latest iteration—I can certainly remember four, or maybe five, over the years—in an attempt to create a definition of British films that is both current with technological change—go back 20 years and the impact of technology was nothing like as important as it is today—and able to deal with the mix between the Government's stated aims for the film production industry and the tax benefits that are available under the present regime.
	The points system is not a perfect science, but this is almost certainly another step in the right direction. Certainly officials have worked very hard to come up with this present formula. I recommend that the Government accept that it is an imperfect art and that they therefore charge the UK Film Council with monitoring the situation. I hope they will accept that a year or two from now they may well have to come back with minor amendments to the system to head off potential abuse and to take advantage of new opportunities which open up year on year.
	I have great sympathy with the noble Baroness's concerns, but I think that we have got to the point that we are at on the information that is available to us. In an ideal world, we would not have to concern ourselves with these abuses of the system. However, we live in the real world. The Government have done well but would be well advised to continue to monitor the process, accepting that there may have to be additional minor changes a few years from now.

Lord Davies of Oldham: My Lords, I am grateful to all noble Lords who have contributed to this short debate and for the support from the Opposition Benches. As my noble friend Lord Puttnam indicated, this is a difficult area. First, there is a need to keep up with technological change and, secondly, any definition of the points count is open to challenge. I note that the noble Baroness, Lady Bonham-Carter, would have preferred the points count to be weighted slightly differently, but we weighted it as we did following great consultation. The test was amended to recognise the role of the producer and the entire cast and crew.
	I hesitate to suggest at the Dispatch Box that any legislation that we put forward is anything less than perfect, but I recognise that the points count is open to challenge and I am obliged to confirm that my noble friend Lord Puttnam is probably right that we may have to return to this issue in the not-too-distant future. I accept entirely that the impact of the order should be monitored. As my noble friend hinted, and as I know both Opposition Front Benches will recognise, in the past we have had difficulties with the supposed use of British film development for tax structures that have been more concerned with saving money than employing British talent and making excellent films.
	This proposal is broadly accepted throughout the industry. I do not pretend that it is perfect in every respect, because I am all too well aware that a points count of this kind is open to elements of challenge in discrete areas. However, first, everyone recognises that, whatever emphasis they would make in the round, this formula will work and make progress, and it is superior to anything that we have had before. Secondly, it is widely acknowledged that the taxation arrangements will be a stimulus and of benefit to the industry. They are a considerable improvement over previous concessions and that is of benefit to the industry, which we all hold in high regard.
	We are mindful that the industry operates in an exceedingly competitive world where it will always be a relatively minor player compared with the vast resources mobilised in the English language by Hollywood. That is a given in this situation so far as concerns film. In Britain we all recognise that continental film producers have the supreme advantage of a different language and of working to a different culture, which means that they are able to protect themselves against the inroads of Hollywood. We benefit from Hollywood's vast production when it is at its best, but we also suffer when it is at its worst. However, the British film industry faces the problem of real and obvious competition. That is why it is right that the department should have the British film industry's interests very much at heart. The order illustrates that we seek to make progress in those terms.

On Question, Motion agreed to.

Railway Safety Levy Regulations 2006

Lord Davies of Oldham: rose to move, That the draft regulations laid before the House on 16 February be approved [19th Report from the Joint Committee].

Lord Davies of Oldham: My Lords, the Office of Rail Regulation will take over from the Health and Safety Commission and the Health and Safety Executive as the health and safety regulator and enforcement body in relation to railways on 1 April. These regulations will permit the ORR to cover its costs for these activities by means of a levy on the rail industry. The ORR's health and safety responsibility will cover all forms of rail transport, so the regulations apply to London Underground, heritage railways and tramways, as well as the national rail network.
	The origins of the levy go back to the Railways and Transport Safety Act 2003. Section 105 of that Act amended the Health and Safety at Work etc. Act 1974 to enable regulations to be made whereby the HSC and HSE would be able to raise a levy to cover all or part of their railway-related work. It included a provision that the first regulations,
	"shall not be made unless a draft has been laid before and approved by resolution of each House of Parliament".
	Today's regulations are the first to be made since the passage of the 2003 Act and that is why both Houses need to approve them.
	The principle that the costs of regulation are met by the industry being regulated is well and widely established. The mechanisms for apportioning those costs, however, present somewhat more of a challenge. The objective is to develop something which is fair and transparent and which broadly reflects where costs fall.
	The regulations place an obligation on providers of railway services to pay a levy to the ORR for the purpose of meeting the cost of the ORR's policy-making and enforcement activities in relation to railway health and safety. The regulations enable the ORR to determine certain matters in relation to the levy, such as the total amount to be imposed and the criteria for assessing the proportion of the levy to be paid by a particular railway service provider. The ORR can request information on turnover from railway service providers. The ORR is allowed under the regulations to make assumptions where a railway service provider fails to supply the requested information.
	The regulations have been subject to extensive consultation. The principle of the levy was generally accepted. Concerns were raised about the impact on smaller companies. I know that my noble friend Lord Faulkner has a great interest in heritage railways, and I have no doubt that he will make that point in this short debate. I shall not go into greater detail on these matters. Suffice it to say that we consulted widely before we produced the regulations. Accordingly, I commend them to the House. I beg to move.
	Moved, That the draft regulations laid before the House on 16 February be approved [19th Report from the Joint Committee].—(Lord Davies of Oldham.)

Lord Hanningfield: My Lords, I thank the Minister for presenting this regulation. He said that it would be a short debate, and I shall try to keep it that way as we all want to get to our Easter Recess as soon as we can.
	As the Minister explained in his opening remarks, the Office of Rail Regulation will take over from the Health and Safety Commission and the Health and Safety Executive as the health and safety regulator and enforcement body in relation to railways on 1 April. As he described, these regulations will permit the ORR to cover its costs for these activities by means of a levy on the rail industry.
	The Opposition support moving Her Majesty's Railway Inspectorate from the Health and Safety Executive to the ORR. However, I must raise a number of concerns. The ORR's policy is that the levy will be payable by each railway service provider by reference to its relevant turnover. Relevant turnover is the turnover derived from the activities of the rail service providers that are regulated by the ORR for health and safety purposes. However, that is not explained further. If a train operator also provides terminal services or operates road vehicles as part of its distribution service to its customers, why should that proportion of its turnover be relevant to the levy calculation? Also, the proposals do not give any details about how the overall levy of ORR safety costs are set and controlled. Significant cost escalation will simply be passed on through the mechanism as set out, with rail service providers having little or no control over costs and no alternative but to pay.
	There may well be circumstances that affect the viability of a company during any year in which such a levy is disproportionate. Is there a method of appeal for a rail company that is not satisfied with the levy being charged?
	Many within the rail sector are concerned that the proposed scheme would place a disproportionate burden on small-scale operators, such as heritage railways. I welcome the steps that the Government have taken to ensure that companies with a small turnover—principally those in the heritage sector—will be protected from the measures, including those with a turnover of less than £1 million, which will continue to be exempt. However, there continues to be general unease, especially among those heritage companies with a turnover higher than the £1 million or £5 million thresholds and among those whose payments would increase compared with the existing system.
	Is the Minister aware that eight heritage companies have a turnover higher than the higher threshold, together with a number which are close to that figure? I stress that those organisations are dependent entirely on voluntary contributions and efforts. I should welcome any further reassurance that the Minister can provide to such organisations. Perhaps he could answer two specific questions. First, will the threshold be inflation-linked—that is, not pushing more companies into the levy scheme proper? Secondly, how long are the thresholds at both the £1 million and £5 million mark likely to remain and under what circumstances would they be changed?
	As I said, on the whole, we support the order and what it tries to achieve. It is interesting to bear in mind that the levy system at present contains no specific incentive for a company to improve its safety standards. Each railway company simply pays a flat fee in accordance with its annual turnover. Surely the Minister would agree that it would be sensible at least to consider a scheme that acted to improve the safety of rail companies and the safety of our rail network. I hope that the Minister will answer my questions.

Lord Faulkner of Worcester: My Lords, I am very pleased to follow the noble Lord, Lord Hanningfield, who has asked a couple of questions that I intended to put to my noble friend. I should declare an interest as a member of the legal services committee of the Heritage Railway Association.
	My noble friend will be aware from our correspondence towards the end of last year that, initially, there was considerable unhappiness in the heritage railway sector about the proposals—not least because they run counter to assurances that my noble friend Lord McIntosh of Haringey gave to the noble Lord, Lord Astor, during the passage of the Railways and Transport Safety Act 2003. My noble friend made clear then that heritage railways would continue to be exempt from the safety regime. I wrote to my noble friend Lord Davies of Oldham about that. In his reply, he told me that the policy context had changed.
	Further to that, discussions have taken place in the way that the noble Lord, Lord Hanningfield, described. There is now broad satisfaction that the Government have moved from what appeared to be a more extreme position. I think that it is fair to say on behalf of the heritage sector that there is broad satisfaction with the threshold limits that are now proposed. However, I reiterate the question posed by the noble Lord, Lord Hanningfield, of whether the limits will be inflation-proofed. I would also like the Minister to confirm whether there are aspects of heritage railway business that will not be included in the turnover calculation. Can he, for example, confirm that the relevant turnover will not include VAT, retail sales, catering or engineering work carried out for external organisations, museums or other educational activities? If the threshold applies strictly to railway operations, that will be acceptable to the sector. But it is important, first, that the amounts are inflation-proofed, and, secondly, that the ancillary activities of the railways are not caught by the turnover limits. Perhaps my noble friend could comment on those points.

Lord Addington: My Lords, I could not speak earlier, so perhaps I will be allowed to join in the debate now. We have no fundamental objection to the regulations, the general thrust of which we support. Probably the most interesting part of the debate relates to heritage railways, and it might be appropriate that I missed my turn to speak on this occasion, as the noble Lord is justifiably regarded as an expert. Many of us will be happy if we can be assured that heritage railways, which are a very important cultural asset, will be protected and that the Government will ensure that they are guarded in the future. For children of all ages, the heritage railways are a wonderful asset and a wonderful part of our living history. It does, however, detract a little from the romance of the age of steam when one realises how much more polluting those things are when they go past. The good and the bad of the past are preserved in this cultural asset, and I hope that the Minister will be able to assure us that it will be guarded.

Lord Hunt of Chesterton: My Lords, I would like the Minister to clarify a couple of points. One is that health and safety are connected to the environment, but they are also connected to security. We had the events of last July in London, and there has been considerable discussion about how the Tube should operate in future and what steps should be taken to address safety and heating, which is an acute problem on the Tube. Will all this come under the regulations? How will it be sorted? There is, of course, an increasing problem with noise as trains go faster; we have come a long way from the old problems caused by steam to the environment. The effects of noise caused by very fast trains in certain areas are not well understood. There is the way in which noise moves. The noise is acute, for example, in some valleys but not in others. This is an under-regarded area of responsibility.
	Finally, I wonder whether the Minister can comment on how any taxation on railways as a result of the order will compare with that on aircraft. In debates in this House, noble Lords have commented that it is so much cheaper to fly to Paris than to go there by train because railways are bearing a tax that aircraft are not. I hope that the regulation will not make railways suffer further from higher tax than the egregiously low taxes on aircraft.

Lord Davies of Oldham: My Lords, I am grateful to noble Lords who have contributed to this short debate. I am not sure whether my noble friend Lord Hunt of Chesterton quite welcomes the regulations, but I think that noble Lords on both Opposition Front Benches broadly welcome the proposals. I shall deal first with the questions that have been asked. I assure my noble friend Lord Faulkner of Worcester that the turnover described in the regulations relates to the operation of a railway, not to extraneous costs. Income from refreshments sold on a heritage railway would not be part of the turnover; only the actual operation of the railway would be. Nor would the construction of new lines, for example, be brought within this framework. So the concept of turnover relates to the operation of the railway.
	I was also asked whether people who think they have been badly treated could appeal. It would, of course, be open to any regulated company to seek judicial review of a decision if it considered the Office of Rail Regulation to have acted unreasonably. I should add that the Office of Rail Regulation is subject to scrutiny by the National Audit Office and the Public Accounts Committee. So any unfair and arbitrary action by the ORR would be aired fairly promptly. The offended party would make sure that it was in the public arena very rapidly and, of course, would be subject to parliamentary interest from that point. But, of course, in such a situation, judicial review is always the last stop.
	The noble Lord, Lord Hanningfield, also pointed out that there are a number of heritage railways with turnovers above £1 million. These are subject, in the first range, to a levy of only £1,000. I hear what the noble Lord says—that heritage railways are usually sustained through voluntary efforts and costs have to be kept to the lowest level possible—but he will recognise that a levy of £1,000 on a turnover of more than £1 million is a modest amount.
	The noble Lord asked how long these figures would remain in place and whether they would be inflation-linked, which is also the burden of the remarks of my noble friend Lord Faulkner. This is a matter for the Office of Rail Regulation to consider; the limits are not prescribed in the regulations. We would not expect something which is, by definition, bound to be open to change to be specified in the regulations. The figures can be reviewed by the Office of Rail Regulation each year when it makes its annual determination. It is committed to a full review of the levy regime in the light of experience, and it expects to begin work on this at the end of 2007. Whether the £1 million and £5 million limits need to be varied will form part of that review. I have no doubt that if it proved to be the case that these figures grievously affected the operation of the small number of heritage railways which come within the framework, the Office of Rail Regulation would take that matter on board, and would expect to do so within two or three years of the order becoming part of the statute.
	I should emphasise to my noble friend Lord Hunt that, like heritage railways and tramways, the Tube is certainly part of this regulation. Inevitably, health and safety regulations on Tube lines have somewhat different expectations, for all the reasons that we can well imagine, and it is because of this that the system has a somewhat different emphasis from the more obvious overground lines. Nevertheless, we have sought to promote regulations that govern the whole sector, as we are obliged to do.
	I hear what my noble friend says about noise. I think the whole country is aware of the fact that, among all the environmental aspects of health that we have to consider, noise is an increasing factor. That is why it is so prominent in regard to road transport and air transport, which the noble Lord, Lord Hanningfield, and myself have enjoyed debating over these past few—I was going to say "interminable months"—lively weeks. Health and safety regulations for rail are different from the ones for air for very obvious reasons. They are entirely different regimes.
	Is the railway being adversely affected by these regulations? I do not think so. The railway prides itself—rightly—on its extraordinary success in terms of accident rates. Whenever a disaster occurs on the railway, we all know of the shock to the national psyche that occurs. He will recognise that rail remains the safest form of land transport. The reason air can compare with it at all is simply that air transport covers many thousands of miles with its passengers. In many cases, it will be many thousands of miles before any dramatic acts of taking off or landing take place with the aircraft, whereas rail passengers are, by definition, always in contact with the track and there is always potential danger.
	Rail is not being disadvantaged by this. It is being guaranteed that in moving these powers away from the Health and Safety Executive and directly to the Office of the Rail Regulator, it is having its health and safety regulation—on whose high standards it has always prided itself—directly related to a body dealing uniquely with rail. It can therefore take account of rail's interests, as my noble friend was enjoining us to do.
	I re-emphasise, in my final brief remarks, that these regulations have been tabled against a background of widespread consultation and general approval. The heritage industry has indeed presented its case with force, as my noble friend Lord Faulkner knows only too well. Indeed, all aspects of rail have had the chance to comment on these proposals and the regulations command the widespread support of the industry.

On Question, Motion agreed to.

Employment Equality (Age)Regulations 2006

Lord McKenzie of Luton: rose to move, That the draft regulations laid before the House on 9 March be approved [21st Report from the Joint Committee and 28th Report from the Merits Committee].

Lord McKenzie of Luton: My Lords, these regulations are the last major stage in our implementation of the European employment directive. They will outlaw unjustified age discrimination in employment and vocational training across England, Scotland and Wales, introducing important new rights for everyone.
	People's perceptions of ageing and old age vary greatly. While a teenager might regard a person in his or her 30s as old, many people in their 70s or 80s do not regard themselves as old and do not wish to be labelled as such. Older people today can expect to live longer than those in the past, and future generations can expect to live longer still. For example, a 65 year-old today can expect to live a further 19 years. By 2051, his counterpart can expect to live a further 21 years, almost double the life expectancy of a 65 year-old man a century earlier. By then, the average woman of 65 can expect to reach almost 90.
	This legislation, however, is not just about older people; it covers people of all ages. Discrimination itself knows no age barrier, although it is undoubtedly older people who experience it the most. This legislation will have far-reaching consequences, extending important new rights and responsibilities to all individuals and businesses. They are far-reaching and positive consequences, as we have said throughout. Tackling age discrimination is good for individuals, good for business and good for society.
	This will mean improved opportunities for thousands of individuals who are currently denied work, training or promotion simply because of their age, and bring benefits to employers—mainly due to increases in productivity from the expansion of training—as well as better matching of skills with jobs. This is also good for society, through both promoting greater equality and having a beneficial long-term impact on the economy. We estimate that fairer business practices and increased participation in the labour market brought about by these regulations could add up to an extra £2 billion to GDP by 2016.
	However, the regulations are not just about employment: they will also apply to access to vocational training and guidance, covering all training that contributes to employability. That means all training provided by employers and private training companies, as well as all courses offered by universities, further education colleges, and other such institutions. A uniform regime will be created, providing legal certainty for both institutions and individuals. The teaching of pupils in schools, however, is excluded since such education is general in nature and does not amount to vocational training within the meaning of the directive.
	The regulations have been developed through a process of continuous engagement with our stakeholders, through four national consultations, meetings of our Age Advisory Group, and many less formal contributions from key stakeholders. This has helped to ensure that the final regulations are clear, effective and workable; and strike the right balance between new rights for individuals and allowing business to operate productively and fairly.
	It is important to recognise that there is a balance to be struck, a fact acknowledged by the directive. There are circumstances in which it is necessary to make distinctions on the grounds of age, which is why we have made use of the directive's provisions that allow age-based practices to continue if they can be objectively justified. This is a stiff test—not an excuse for employers to continue outmoded, unacceptable ageism.
	We have considered carefully the responses to last year's Coming of Age consultation on draft regulations. While the overall approach remains unchanged, we have responded by making a number of improvements to ensure that the regulations work effectively and fairly and to close unintended loopholes. I cannot cover every issue, but I will comment on some of the most important issues and changes.
	There has been considerable discussion and speculation surrounding the implications of the age legislation for the statutory redundancy scheme. We have been discussing the way forward on this with key stakeholders since last summer. As announced by the Minister for Employment Relations in a Written Statement in another place on 2 March, evidence demonstrates that young, prime age and older workers fall into three distinct economic categories, with older workers facing a particularly difficult position in the employment market. We believe that it is sensible for the level of support provided by the redundancy scheme to reflect these categories and that we should retain the three age bands in the current scheme. We have looked at this point very carefully and are confident that retaining the age bands is permitted by the directive.
	The alternative of introducing a system using a single multiplier would have left a significant group of older workers substantially worse off than at present. I imagine that all sides of the House will agree that this would not have been an acceptable outcome. Even if a substantial amount of money were injected into the scheme to leave older workers no worse off, the enhanced benefits to younger workers would not have been justified by their position in the labour market.
	Others have been concerned that employment benefits awarded on the basis of length of service would be removed by these regulations. We do not want to stop employers providing these benefits. In most cases they are a useful and widely welcomed way of reflecting experience, encouraging or rewarding loyalty or maintaining motivation.
	Under the regulations, any benefit dependent on service of five years or less will be exempt. Bearing in mind the difficulties posed by longer pay scales for women in particular, we believe that five years is a reasonable period within which employers should not have to justify their practices on an individual basis. Benefits dependent on longer service are also exempt, as long as they fulfil a business need, such as rewarding the loyalty, encouraging the motivation or recognising the experience of workers.
	Retirement has been a key issue throughout the development of the regulations. We listened to views from all sides before deciding our approach, announced in December 2004. As we outlined then, the regulations will provide for a default retirement age of 65. They will also introduce a new right for employees to request working beyond their normal retirement age. Employers will have a duty to consider such requests. This will help make retirement an opportunity for constructive dialogue between employer and employee, from which both can benefit. Many employees will be able to continue in jobs they are often not ready to leave, while employers will benefit from retaining skilled and experienced workers. This will help to promote the culture change that needs to accompany the legislation.
	The default regime is not a national compulsory retirement age. Employers will not have to retire employees once they reach 65—they are free to continue to employ individuals as long as they like. Instead, the default retirement age will allow employers to continue to use retirement as a tool for workforce planning while allowing employees to plan for the future.
	The upper age limit on claims for unfair dismissal will also be removed, meaning that older workers will get the same rights to claim unfair dismissal as their younger colleagues. The responses to Coming of Age showed that the draft provisions on unfair dismissal and retirement were too uncertain and open to challenge. We have responded, therefore, by tightening up the procedures. The result is clarity for employers and fairness for employees. Retirements will be lawful only if they are genuine. Employers will not be able to dress up a dismissal on other grounds as retirement. If they try to do that, the dismissal will be unfair. Equally, where the retirement is genuine and the employer follows the correct procedure, it cannot be challenged in a tribunal. We will monitor the success of these new provisions and review them in 2011. If the evidence shows that we no longer need the default retirement age, the Government will abolish it.
	The regulations will mean also that, for the first time, the youngest and oldest workers will have access to the payments made by employers to their employees to cover sickness, maternity, paternity and adoption. The lower and upper age limits of 16 and 65 that are associated with the receipt of statutory sick, maternity, adoption and paternity pay will be removed so that the legislation for all four statutory payments applies in exactly the same way to all.
	The regulations apply also to occupational pension schemes and to employer contributions to personal pensions. They do not apply to the state pension, which remains unaffected. It is not the role of this legislation to interfere unnecessarily with pension provision. The regulations allow occupational pension schemes to continue undisturbed as far as possible. However, they do not allow a blanket exemption for all age-related aspects of these schemes.
	We have reviewed the rules that typically exist in schemes and have discussed with pension experts the reasons for those rules. Where rules are plainly justified, the regulations permit them to continue. With other rules, employers have the option of objectively justifying them by reference to their own particular circumstances or, if they cannot do so, getting rid of them. It became clear during consultation that some of the exemptions that were included in the draft regulations went further than we intended. We have therefore limited and qualified the exemptions where necessary to avoid them being used to the detriment of workers and to ensure that justifiable practices are able to continue. To help businesses and individuals, we will publish separate guidance on these provisions.
	These regulations are the final element of our continuing programme to tackle age discrimination in employment and vocational training. They build on the work that is already being done by the Age Positive and National Guidance campaigns. They also complement the measures that were announced in the recent Welfare Reform Green Paper, specifically those aimed at equalising the support available for older people seeking work. The regulations represent a positive addition to our domestic equality legislation. They will make a practical difference to the lives of millions and should be welcomed. I commend them to the House. I beg to move.
	Moved, That the draft regulations laid before the House on 9 March be approved [21st Report from the Joint Committee and 28th Report from the Merits Committee].—(Lord McKenzie of Luton.)

Lord De Mauley: My Lords, I thank the Minister for explaining the regulations so clearly. We agree that unfair discrimination based on age is clearly unacceptable and the vast majority of employers recognise that the only acceptable basis for discrimination is ability. It is important that people should be encouraged to work until a later age than has been the case hitherto.
	Making the most of employees and attracting new workers is vital to the competitiveness of United Kingdom firms. Our businesses already well recognise that the challenge of an ageing population means that employment of the over-50s will become ever more important to them and they are addressing this regardless of coercion. Government and businesses have an equal imperative to find ways of increasing participation among this group. Experience tends to show that people in work also remain healthier longer, which is good for the individual and good for the National Health Service.
	However, it is necessary to strike a balance between, on the one hand, the fact that people should be able to work for as long as they are willing and able and, on the other, that a clear retirement age is important to companies in planning their businesses and ensuring that firms can retire employees with dignity, rather than their being forced to dismiss staff on grounds of competence. The new right for employees to request postponement of retirement will give staff the opportunity to discuss working longer.
	I hope that the Minister will forgive me if I ask some questions that he may already have answered—the regulations are quite complicated. Will he confirm that the right-to-request procedure will nevertheless allow employers the final say over the retirement date to avoid a huge increase in employment tribunal claims? Can the obligation to discuss be complied with without employers being forced to hold innumerable and repeated discussions with any individual employee who cares to raise the issue? A common-sense approach is necessary. Will the Minister confirm that the new regulations will not be seen by aggrieved employees of whatever age as a carte blanche to take their employer to tribunal? Employers must feel confident that they can defend perfectly justifiable age-related employment practices where they benefit both employer and employee. The Government must recognise that the new law will take time to bed down as employers become used to the new requirements. We note that no transitional arrangements seem to exist in the draft regulations. Does the Minister have any comment on that observation?
	Just as it is right to ensure that older workers receive higher levels of redundancy pay, companies should be allowed to reward the loyalty of their longer-serving employees with incentives such as more holidays and better sick pay. Other practices, such as health checks for older workers or IT training for over-50s, are also highly valued and should not be scrapped as a result of the regulations. I think that the Minister has assured the House that those practices will not become outlawed by the regulations, but will he confirm that?
	Will he further assure the House that the regulations will not prevent employers, first, paying a youth rate to inexperienced employees under 21, which might otherwise discourage employers from offering them employment at all; and, secondly, providing length of service related benefits? Concern has also been raised that the regulations will equalise statutory redundancy pay across age groups, where the existing framework recognises that older workers are less likely to be re-employed. Will the Minister assure the House that those fears are groundless?
	The Minister is also aware that partnerships have two fundamental concerns in relation to the regulations. First, Regulation 7 provides a default retirement age for employees at 65. That default is not extended to partnerships and it is therefore necessary for partnerships to provide objective justification for a retirement age at any given age that may be specified and agreed on by the partners. The absence of any guidance as to what a partnership is required to do to provide objective justification for retirement at a given age—particularly bearing in mind that it was observed several times by the Minister in the other place on Monday that such a threshold is going to be "a stiff test" to satisfy—is of great concern, as it creates significant business uncertainty as to how this test can be accomplished and demonstrably shown to have been satisfied.
	Secondly, although it is permitted by Regulations 32(l) and 32(2) to attach length of service benefits to benefits that employees and partners may enjoy while they are within employment or continue to be within a partnership, Regulation 32(7) does not sanction any length of service benefits which, although arising through length of service, are awarded if they arise by virtue of the employee or partner ceasing to work. In other words, if length of service benefits arise after employment, objective justification still has to be provided. That requirement creates significant business uncertainty to employees and partnerships alike. For example, in the partnership context, it will be unclear whether post-retirement benefits which attach to length of service, commonly available to partners after their departure from a partnership, can be regarded as lawful.
	It thus emerges that in both these areas of concern it is necessary for partnerships to provide objective justification for arrangements which have none the less been agreed on by partners through internal consultation and voting. Partners frequently play a key role, both as proprietors and managers of the business in which they work, and in making the decisions which create their governing rules. We thus contend that such consultation and voting should be given full and proper regard so as to demonstrate objective justification.
	Accordingly, it would be of great assistance if the Minister could confirm that Her Majesty's Government recognise the different status of members of partnerships from employees, and in consequence undertake to ensure that guidance is published well before 1 October but after further consultation with those representing professional partnerships. That would ensure that employment tribunals take account of the very different nature of the partnership relationship and give proper weight to the rules and means by which partnerships determine these arrangements and thus allow partnerships to satisfy themselves that the requisite level of objective justification has been achieved. Without such guidance we believe that partnerships will face a significant degree of uncertainty in their business planning which will both affect their ability to bring in new partners as well as risk undermining their vital contribution to the UK economy.
	We support an end to age discrimination but the above concerns are important. I look forward to the Minister's responses.

Baroness Sharp of Guildford: My Lords, I too, thank the Minister for explaining the regulations to us and make it clear that we abhor age discrimination, whether against young or old. I also declare an interest as the chair of Age Concern Surrey.
	We on these Benches have long advocated what we call the flexible age of retirement, leaving it to the individual to decide whether he or she feels that it is appropriate to retire. We have also long recognised that, in so far as one puts forward such a proposal, it is necessary to balance the interests of employer and employee, and in drawing up these regulations it seems that this process of balancing has been done and, through a process of consultation, the interests of the two sides have been brought together in, in most cases, a reasonably amicable agreement on the way forward.
	In particular, we welcome the notion of the default age of retirement, although in some cases it has a bias a little bit in favour of the employer and against the employee. For example, people over 65 will no longer have any statutory right to remain in the job if the employer really wants them to go.
	We have two questions for the Minister. First, it was clear from the discussion in the other place—and the Minister repeated it—that universities cannot refuse an applicant who has the appropriate qualifications on the basis of age. At present, many government grants for such courses are not normally given over the age of 55. What is the proposition in relation to government grants? Do the Government seek to argue that that discrimination is objectively justified, or will all grants be available on a non-age-discrimination basis?
	My second question mirrors that put from the Opposition Benches, and relates to Regulation 32(7), which states that benefit does not include benefits awarded to a worker,
	"by virtue of his ceasing to work for",
	the employer or partnership. Thus, length-of-service benefits given on retirement are excluded from exemptions; they will need to be objectively justified. Why have the Government done this?
	My impression is that the latest draft contains an additional provision that was not consulted on, and it is not clear on what basis Regulation 32(7) was added. Was it in response to comments made during the consultation? If so, what were these comments? It is difficult to understand why the exemptions should not also apply to benefits accumulated through the length of service but awarded on retirement. If an employer wants to reward loyalty during employment, surely he might want to encourage employees to stay until retirement so that they might get, for example, post-retirement medical benefits or life assurance or, in the case of partnerships, post-retirement packages.
	I have three questions. Given that the Government accept that length-of-service benefits generally should be granted an exemption from the normally high test of objective justification, why have they decided in this latest draft to exclude all length-of-service benefits based on retirement other than enhanced redundancy payments and pensions? Was that in response to the consultation? Do the Government want employers to have the additional cost and red tape of proving objective justification in such circumstances? Do they recognise the likely consequences are to discourage employers and partnerships from continuing with these types of benefit to people after they retire? Is that really what they intend?
	Again, I thank the Minister for explaining the regulations. By and large, we on these Benches support them.

Lord Freeman: My Lords, I very much agree with what my noble friend Lord De Mauley said about partnerships. I shall not repeat the arguments and I shall be very brief, because an important debate follows. I declare an interest as a retired partner of the City accounting firm PricewaterhouseCoopers.
	I pay tribute to officials in the DTI for constructing regulations that really amount to a Bill, with 64 provisions as well as nine schedules. I know that the procedures are essentially "take it or leave it" in this place, and I believe that to be unsatisfactory, but overall they have done a very effective and efficient job. However, I am concerned about the way the regulations deal with the relationships between partners. That is different from the relationship between a partnership like PWC and its employees. The relationships between partners are different, because you enter into a partnership on a voluntary basis and you normally have an equal voting right while you are a partner. Setting retirement age and setting the scale and nature of benefits to be paid post-retirement are matters for internal agreement and discussion. There is a perception in the City—certainly in the major law firms, accounting firms and surveyors—that trying to meet what has been described by the Minister as a "stiff test" in objectively justifying existing rules in partnerships represents an unfair burden.
	In the United States, employment legislation specifically excludes the relationship between partners. I think everyone in your Lordships' House appreciates the spirit of this legislation and its main thrust, except for this specific point about partnerships. I end by asking through the Minister, as my noble friend Lord De Mauley has, that in the coming months officials consult the three main professional bodies representing law, accounting and surveying to see what their constructive comments might be in meeting the objectives of government but being fair to their contribution to the economy of this country.

Lord McKenzie of Luton: My Lords, I start by thanking all noble Lords who have contributed to this discussion. I think there has been broad support for the thrust of these regulations, which is very welcome. I will seek to deal with each of the points that have been raised. I thank some noble Lords for the advance notice of the questions and points that were raised. That makes it easier.
	The noble Lord, Lord De Mauley asked whether the final decision on retirement remained with the employer, and the answer is yes, provided that the six-month notice procedure is followed. So long as it is, the default arrangement is sufficient.
	(10)There was the issue of whether there need be lots of discussion with individual employees, or whether the employer can reach agreement with employees' representatives to put in place a policy for the business. Clearly, if an employer wishes to have a mandatory retirement age below 65, they will need to able to objectively justify it otherwise it will be unlawfully discriminatory. An employer whose discussion agreed a retirement age or other policy with employees' representatives is likely to be in a stronger position in demonstrating that it is justified than one that unilaterally imposed it as a policy, but that is not the whole answer. Individual situations will need to be looked at in their particular circumstances.
	As to whether the regulations will become a carte blanche for employees to take employers to tribunals, in the light of responses to our consultation on the draft regulations we have tightened up the provisions relating to the new duty to consider procedure and to unfair dismissal. I am grateful again to noble Lords for recognising that it was a very full and effective consultation process. It was clear from the consultation that the regulations provided too much uncertainty and would result in unnecessary tribunal cases. We feel that we have remedied that and provided some certainty.
	The noble Lord, Lord De Mauley, asked about transitional arrangements, which did not seem to be included. Schedules 7 and 8 contain all the necessary transitional arrangements. They mainly relate to retirement, and deal with the fact that employers will not be in a position to give six months' notice for dismissals taking place prior to April 2007. The transitional provisions ensure that employers will not have to do anything new before the regulations come into force on 1 October this year. They are based on the requirement to give proper contractual or statutory notice of termination.
	With regard to whether it is possible to continue with arrangements that employees may have regarding high levels of redundancy pay incentives, such as extra holiday, or whether they might be outlawed, the legislation—which includes exemptions for paid and non-paid benefits—will not outlaw benefits based on length of service. We recognise that such benefits are widely supported and play a positive role in rewarding loyalty, providing incentives and helping motivation. The regulations are framed in such a way that employers are not required to justify every benefit on an individual basis.
	Perhaps I might take up the point probed by the noble Baroness, Lady Sharp, and the noble Lord, Lord De Mauley, about post-retirement benefits. We see a distinction between exemptions provided for in-service benefits, which reward loyalty and efficiency, and post-retirement benefits. It does not mean that post-retirement benefits are outlawed, but that they are subject to justification under the regulations. Will the regulations prevent employers paying a youth rate to inexperienced employees under 21? No: the exemption in Regulation 31 is deliberately designed to protect employers against challenge where they are using youth rates of the national minimum wage. They cannot discriminate within those bands, and it depends on whether the rates being paid are above the adult rate. Different considerations could apply then, but the broad answer is no. There was also concern that the regulations would equalise statutory redundancy pay across age groups; I think I dealt with that in the presentation. The matter was certainly considered. We believe keeping the bands, but raising both ends, to be consistent with the directive, which is why we proceeded down that path.
	The noble Lords, Lord De Mauley and Lord Freeman, raised the issue of partnerships. I understand the points that have been pressed, and the very different nature of partnership arrangements from normal employer-employee relationships. The default retirement age cannot extend to partners. Similar considerations apply, for example, to office holders, whose retirement will have to be objectively justified if necessary. We have no plans to issue specific guidance on the nature of partnerships to employment tribunals. We believe that tribunals are experienced in dealing with a wide range of difficult and complex situations. It is wrong to suggest that they would not be able to understand the evidence put to them by partnerships, or apply the law to them. They are perfectly capable of deciding whether a particular age-based practice is objectively justified. Clearly, the existence of an agreement about retirement between partners, properly considered and based on sound business reasons, could help support the partnership's case on objective justifications, since partners would have been party to discussions and would have agreed to the need for an appropriate compulsory retirement age.
	An explanation of the test of objective justification will be included in the ACAS good practice guide. I hope that will help. It will be a general example on which organisations will be able to base their own particular objective justifications, although tribunals will not be obliged to take this into account. Partners should be able to challenge their retirement if they feel that they have been discriminated against because of their age, especially if they feel that they are still bringing value to the firm. I was interested to hear the noble Lord, Lord Freeman, say that partnerships are specifically exempt under this legislation in the US. There was some interesting press comment about the number of US law firms in the UK which apparently do not have any retirement age as part of their arrangements.
	I touched on exemption for service-related benefits earlier. These should be available for in-service benefits. They are widely accepted as playing an important role in rewarding loyalty, recognising experience and encouraging motivation. Payments on retirement are not covered but, as I said earlier, that does not mean that they are outlawed; it depends on their being objectively justified. The noble Baroness, Lady Sharp, raised issues of funding, particularly for universities, indicating that it is difficult to get government grants beyond the age of 55. These regulations cover employment and access to vocational training; funding for training falls outside the scope of the directive and is therefore not affected by it. I think I dealt with the other points raised about in-service benefits.
	I hope I have been able to cover each of the points raised by noble Lords; I thank them again for their support. This is a very important step forward, which will have wide-ranging benefits for individuals and business. I commend the regulations to the House.

On Question, Motion agreed to.

Universities: Research Assessment Exercise

Lord Williams of Elvel: rose to ask Her Majesty's Government whether the operation of the research assessment exercise in universities is satisfactory.
	My Lords, I ask this Question much looking forward to the maiden speech of the noble Lord, Lord Rees of Ludlow, whom we welcome in this House. I ask it not because I have any particular declarable interest in the matter, but because I have been persuaded by some of my academic friends, who have helped me very much in writing the books that I have written, that something is going rather wrong. In the light of the evidence that I have received, I have now developed a belief that the operation of the research assessment exercise—the RAE—in universities is, to use the word in my Question, very far from "satisfactory".
	Nevertheless, unless I am much mistaken, there is a general view that some sort of system, both to encourage research in universities and to assess research quality, is necessary and desirable. As Sir Gareth Roberts pointed out in the preface to his report of 2003:
	"All who examine the impact of the RAE upon UK research and its international reputation must, I think, agree that it has made us more self-critical and more respected across the world".
	From all that I have heard, the introduction of the RAE in 1989 galvanised academics—particularly in some of our most senior universities—into research activity that had previously passed them by. It also had the result in the early 1990s of provoking academic institutions into granting early retirement to those who were, as one of my informants put it, burnt out, to open the way for junior lecturers to progress. But in 1992 the RAE took on a life of its own. Instead of remaining a method of encouraging high-quality research, the 1992 RAE started the process of linking research results to the allocation of funding, not just to universities but between universities. The system developed grading—individuals being graded and their departments being graded by a subsequent and complex calculation based on how many of the staff had achieved which, if any, individual score.
	Responsibility for funding was transferred to the four higher education funding councils. Since then, departments have, on that basis, been awarded by the councils with funds depending on their grade rating. It is this which has given rise to the present problems, which are particularly acute as we come up to the cut-off date for submissions—November of next year—for the 2007–08 RAE.
	So what are these problems? The first is the age-old problem of form filling. The whole business has become so complex that institutions and individuals are alike diverted from the research that they are meant to be doing in the first place to satisfy the lengthy administrative requirements of the RAE. Bureaucracy, as we know, has a tendency to grow, and this is what has happened, to the point where one of my friends described the burden as,
	"rather like governments constantly campaigning instead of designing and implementing policy".
	The second problem concerns the way in which funding is decided and the effects of that decision. It is true that the Roberts recommendation that the number of grades should be reduced from five to four for the 2008 RAE has been adopted, but that does not solve the problem. I have to admit that the somewhat arcane method of calculating grades and the system of peer review—itself, whatever support it gained from the Roberts report, open to criticism, grinding axes from panels about what they consider to be "good" research—have had some bad press recently.
	Another effect is that if a department scores lower than four—or presumably one in the 2008 grading—it gets no funding at all. One department that I know of, for example, scored five in 2001 and thus brought in £1.75 million annually to its university. If that department slips down in its 2008 grading, it will completely lose that funding, which would throw the whole department into disarray.
	The effects do not stop there. It is relatively easy for historians, for instance, to break their pre-determined research pattern on a book and to write, if instructed by a head of department, an article acceptable for the purposes of the RAE—however profoundly irritating that may be. But a philosopher writing up a lifetime's thoughts on, say, metaphysics—or a scientist with a 10-year programme to investigate the properties of a neutron, or a medical academic—would not find it so easy. The effect—unintended, no doubt—is to penalise laboratory-based subject departments. That can hardly be the best result for original research in the United Kingdom.
	This, in turn, gives rise to the third problem: the tendency for universities and their departments to treat the whole thing as a game—desperate and in some cases deadly, but none the less a game within a series of arcane rules and against an opponent whose identity cannot truly be perceived. Academics with a strong research record are, in the run-up to RAE, "tapped", to use a football expression, and, if they fall to the temptation, are poached to bolster the RAE output of their new institution. I am told that membership of institutions is used creatively; for instance, expanding it to include foreign implants. If the game is lost and the RAE grade is such as to deprive an institution of funding, it will of necessity have recourse to the other funding stream, through capitation-based teaching fees, in order to lever itself back on to the RAE ladder.
	More and more students are admitted, leading, of course, to longer teaching hours in seminars, more essays, more examinations and, unfortunately, more cases of personal tutoring to try to help and retain students who are experiencing problems. Consequently, there is less time and intellectual energy available for the RAE-acceptable research. The whole process thus becomes self-defeating. These problems are real and the complaints about them are sincerely made. One of my friends was terse. He told me, "RAE is a pig". He then went on to say that he was perhaps being rather unfair to pigs.
	Of course, it is not enough just to recite a litany of complaints. On the plus side, as I said earlier, there is a general recognition that some sort of research assessment is necessary and desirable. So the questions that are relevant are, first, can the RAE continue in anything like its present form in 2008 and afterwards and, secondly, if not, what should replace it?
	It so happens that we had a tantalising hint of the Government's thinking in the Treasury document, Science and innovation investment framework 2004-2014: next steps, published alongside the Budget last week. The document states:
	"the Government has a firm presumption that after the 2008 RAE the system for assessing research quality and allocating 'quality related' (QR) research funding to universities from the Department for Education and Skills will be mainly metrics-based"—
	whatever that means. The higher education Minister has announced a working group to study the matter. That is all very well, but we would like some flesh on the bones and I hope that this afternoon's debate will provide my noble friend with an opportunity to give us precisely that.

Lord Norton of Louth: My Lords, I declare an interest as an academic and as a head of a university department. However, as always in your Lordships' House, I speak solely in a personal capacity.
	I congratulate the noble Lord, Lord Williams of Elvel, on raising this important and timely Question. The research assessment exercise figures prominently—some may think too prominently—in academic life. I have been involved in every research assessment exercise.
	There can be little doubt that the RAE has served its purpose in having a ratchet effect on research output. It has had a salutary effect on universities and has served to drive up standards. That is my starting point. I do not question the purpose of the exercise. Rather, what I want to focus upon, following the noble Lord, Lord Williams, is some of the associated practical problems and how those can inform the discussion as to where we go from here. The noble Lord, Lord Williams, has focused particularly on the financial side. Given that, I intend to focus on slightly different aspects.
	Two particular concerns are those of burden and uncertainty. By burden, I refer to the sheer time and effort required by the exercise. The RAE may be effective, but it has not always been efficient. I recognise the value of peer review—about which I had some strange comments once I got my peerage—but I have always argued that it may be possible to utilise it in a more efficient manner.
	There are two aspects to the burden. One is the amount of time and effort that is necessary to prepare for the RAE. Having a research output is necessary, but not sufficient. The problem for some, especially those engaged in the review, is that the time taken up by the exercise consumes valuable research time. The other aspect is that the RAE is not the only burden imposed on academics. As the Minister is well aware, this is something that I have previously raised in your Lordships' House. Though many of the different burdens placed on academics may be justified on their individual merits, the collective effect is to create a significant workload which impedes fulfilling the core tasks of teaching and research. Of particular concern is that it also undermines morale.
	This particular concern has been recognised and clearly informs the Government in deciding what should replace the current RAE. I very much welcome the fact that one of the principles that will inform future arrangements, as adumbrated in last week's Treasury document referred to by the noble Lord, is that,
	"the burden on HEIs should be minimised and only the information necessary to ensure a fair distribution of funds should be collected".
	I endorse that and the other principles listed, as well as the clear statement that in discussing future funding arrangements those principles will be adhered to.
	For reasons of time, I will focus on the other area of concern, which is addressed implicitly in one of the principles listed but which I believe needs to be drawn out and emphasised. I refer to the need for greater certainty in the assessment arrangements. As the noble Lord, Lord Williams, touched upon, in universities we have never really had a steady-state situation. I do not mean to imply that academics expect everything to be set in stone, but some degree of continuity is needed, with the assessment criteria clearly identified in good time and then adhered to. This problem is a matter of real and current concern. There is some degree of uncertainty, exacerbated by the Treasury document to which the noble Lord referred, in respect of the RAE and, obviously, of what will follow it.
	The next steps document includes among the principles to be adhered to that of allowing HEIs to plan effectively. I understand where this comes from, given the movements of staff that take place towards the end of an RAE period. That gets at one aspect of the problem from the perspective of universities as institutions, but my concern is as much with those who work in the universities as with the institutional authorities. Academics need to know what is happening with the present RAE and what the thinking is as to what will replace it.
	I would therefore welcome the Minister's response on two points. The first concerns the statements embodied in paragraph 4.18 of the next steps document. It recognises that preparations for the 2008 RAE are well under way. Indeed they are; they have been for some considerable time. A great deal of time, planning and resources has been invested. However, the paragraph states:
	"If an alternative system is agreed and widely supported, and a clear majority of UK universities were in favour of an earlier move to a simpler system, the Government would be willing to consider that".
	My concern here is that, with a cut-off point for the 2008 RAE not far away, academics are busy preparing, while wondering whether they are suddenly going to find some other assessment method employed. Perhaps the Minister could explain what "alternative system" is being referred to, what discussions are taking place and what sort of time frame is involved.
	The second point on which I would welcome the Minister's response concerns what will replace the RAE after 2008. As the noble Lord, Lord Williams of Elvel, said, the Government favour a system that is metrics-based. However, as the next steps document concedes, this is appropriate especially for science, engineering and medicine. It is not clear that it would be appropriate for the social sciences or for the arts and humanities. The Government say that they will explore the option of continuing to convene expert panels to provide an extra level of verification for the results generated by metrics. However, if different methodologies are employed, how will that affect interdisciplinary research? If the research crosses the boundaries between the sciences and the arts, what will be the most appropriate method of assessment?
	It will be extremely helpful to hear more of the Government's thinking on this and their intentions as to the future timetable beyond the proposed consultation on the preferred option for a metrics-based system. The present review and the proposed consultation appear relatively narrow in that they focus on a metrics system. It is not clear how the needs of the social sciences, and the arts and humanities, will be addressed. I am sure that the Minister will agree that it is essential that the research excellence and the contribution to wealth creation of the social sciences, as well as of the arts and humanities, should not appear in any way to be sidelined.
	I reiterate my opening point that the RAE has served to push up standards. There is no dispute about the purpose of the exercise, and I welcome the principles that will guide the future allocation of research funds. My concern is with the detail. We need to get it right. That is absolutely essential, and I endorse all the points made by the noble Lord, Lord Williams of Elvel. We need to achieve a light touch and we need to ensure that, once we have achieved a clear and effective light-touch regime, we stick with it.

Lord Rees of Ludlow: My Lords, as a new Member of this House, I have been impressed by your Lordships' commitment to educational issues and the extraordinary academic firepower that can be deployed on them. I declare an interest as a Cambridge professor.
	The noble Lord, Lord Williams, could not have chosen a better time to question the RAE, especially after the welcome signal last week that the Government are flexible about it. But, despite all the gripes about the RAE, its net effects, at least in the early years, were surely positive. It encouraged early recognition of academic talent, it enhanced mobility and it sustained some of our universities high in the international league.
	One should of course be cynical about the spurious precision of academic "league tables". But, however you tot up the scores, the UK is plainly way ahead of any country on mainland Europe—indeed, ahead of any country apart from the US—in the quality of our best universities. That is a competitive advantage that we should cherish.
	My American colleagues are bemused by our "dual support" system, but I tell them that, for all its problems, it is better than the US system, where professors need to hustle for grants to meet even basic academic needs. If we want to retain dual support but foster research excellence within a diverse university system, something like the RAE is needed, although it is a necessary evil.
	What concerns many of us, and what plainly animates this debate, is that the RAE has become too burdensome. It looms too large in university planning and strategy; it is a kind of game, as the noble Lord said; and it distorts the work patterns of individual academics.
	The Royal Society was among the bodies that recommended changes for the 2008 round. We were especially concerned about the so-called "cliff edges"—the severe penalties of just failing to achieve a particular research rating. It is welcome that the funding councils are now adopting a departmental profile system that avoids that problem.
	I have further concerns. First, there has been undue emphasis on academic publications rather than applied work. That is now widely recognised. Secondly, no real credit is given for popular writing and outreach. Heads of science departments consequently discourage staff from such engagement with the public—essential though it is if the country is to apply science wisely. Thirdly, the system under-rates something that is surely part of a university teacher's remit: broad learning and scholarship; reflective inquiry for its own sake.
	If we endorse the need for selectivity, we must accept that there is no easy fix. There is plainly a trade-off: simple procedures are crude; any schemes that offer refined discrimination will be burdensome. Grant income is indeed a rough surrogate of quality in experimental science. But it is inappropriate in maths and the humanities. Indeed, even in science it would be perverse to penalise researchers who produce brilliant work for minimal resources. They should be encouraged.
	Other surrogate metrics—citation counts and the like—have deficiencies. We know that a few universities attract the lion's share of all research funding. That is likely to stay true whatever system prevails. In academia, the law of increasing returns applies. Excellence feeds on itself; success attracts more success.
	Despite the trend towards concentration, there is at least one top-rated department in more than 50 universities. We need to maintain a system that allows excellence to sprout and bloom anywhere in the system.
	Let me give an example. Leicester University, where I am a visiting professor, is world-class in genetics and in space science. That was not planned by anyone. Outstanding young lecturers in these two fields happened to have jobs there 30 years ago, and both had the enterprise to build up a strong research group. Selectivity should not be so harsh that such opportunities now are choked off in less-favoured universities. The dynamic knowledge base within universities is a crucial resource for the nation. Universities are a source of independent expertise—of people who can recognise and seize exploitable new ideas from anywhere in the world. We should remember that 95 per cent of research is still done outside the UK.
	The most crucial output of a university is its graduates. How well they are taught depends on the quality of the faculty. I am worried that UK academia now seems less alluring than it did when Members of this House were choosing their careers. Attracting and retaining high-calibre people who have an enticing range of other career options requires that universities have a benign research environment. The Funding Council's QR is a key funding stream in this regard and a catalyst for other support.
	If whatever replaces the RAE is successful, it can enhance Britain's academic excellence, and render our universities even more a magnet for mobile talent. There is a huge upside for this country. If we do not sustain our competitive edge, we risk a downward spiral. A lot depends on getting university funding right, and that is why we should welcome this debate.

Lord Giddens: My Lords, it gives me great pleasure to congratulate the noble Lord, Lord Rees of Ludlow, on his absolutely outstanding maiden speech. The noble Lord and I go back quite a long way, to a time when we were both fellows at King's College Cambridge—I still am a fellow at King's College. The noble Lord, Lord Rees, is the author—believe it or not—of more than 500 scientific papers. How does one person manage to do that? He is the president of the Royal Society and master of Trinity College. How elevated can you get? He will be a major addition to your Lordships' House and I am very pleased to welcome him here.
	Let me begin by thanking my noble friend Lord Williams of Elvel for initiating this debate. I must say that during my brief time in this House, he has been an important figure in pushing universities to the forefront. At one point, I was director of the London School of Economics. I used to say to the graduating students, "The LSE stands for many things: Let's See Europe; Long Stay in England and"—my favourite—"Lots of Study Expected". In the Tube on the way here, I had a bit of fun playing around with RAE, which yields the following pearls: "Ridiculous Asinine Endeavour"; "Really Absurd Experiment"; and "Rewards Assiduous Eggheads". The Minister is a very creative person, so I invite him to produce his own version in his summing-up speech.
	I prefer the third of those because, as other noble Lords have said, the RAE has, on balance, been very successful. Some of us here are, if I may put it this way, mature enough to remember a time when things were very different. I used to teach at a university in the centre of the UK—not too far from Leicester—that was said to be the site of Kingsley Amis's novel Lucky Jim, in which the main character spends a lot of his time throwing darts at a picture of his professor on the back of his door. Well, we did not do that, but we did the functional equivalent. How different things are now. The RAE is one of the main factors responsible for that difference.
	If we consider my ex-institution, the LSE, it put 97 per cent of its staff in for the most recent research exercise. Most of those whom we could not place were people whom we could not place in the categories—not people who were not research-active—so the institution was almost 100 per cent research-active. We got that way without too much of what is currently called games playing in the rest of the system. According to government statistics in the aforementioned Treasury document, in the 1996 RAE, 32 per cent of the staff submitted worked in departments rated as excellent. By 2001, that had risen to 55 per cent.
	The RAE has been pretty popular among academics—at least in the research-based universities. There is one major reason for that. Despite all the work that is involved, it also involves peer-assessment and evaluation. Evaluation by one's peers is the prime reason for its success. As far as research universities are concerned, the QAA does not fall into that category and is therefore much less popular. The problems with the RAE are well known and I shall not go through them in detail. The excellent Roberts review, which has already been referred to, mentioned eight major difficulties with the RAE. The obvious one is that it is very expensive. The cost of the 2008 RAE, according to the Treasury document, is estimated to be at least £45 million, but some have suggested that the real cost may be closer to £400 million, because of the foregone research activity and productivity of the diversity of academics involved.
	Secondly, there is the core problem of distortion by evaluation mechanisms. All evaluation mechanisms distort the outcomes that they are supposed to measure, but in the case of the RAE, the distortion is pretty large. Finally, as the noble Lord, Lord Rees, mentioned, it is not clear that the RAE makes place for people who are not popular or whose ideas are not popular. They may even be scorned, but they are the very people who can be most productive and important for future generations.
	The Treasury document, the Budget Statement, seems to say that the RAE has met its demise. I am not sure that that is the normal route by which to announce that. Unless I have missed something, I ask my noble friend to comment on that. In my view, it is right to scrap the RAE; it did its job but it is no longer clear that it can do much more. Few people here seem to want an American-style competitive system, so if it is to be scrapped, we will have to pay a lot of attention to what will replace it. It is one thing to say, "Scrap it"; it is another thing altogether to say what should replace it if we are still going to have dual-funding as the Treasury says. So here is my list of things that might be worth considering as a replacement.
	First, it is simply not an option to dispense with the 2008 RAE. I do not think that the Government should even have suggested that it might be. I am not quite sure whether that means that certain science-based departments, for example, could opt out of it, but I think it should go ahead as planned. Secondly, in whatever replaces the RAE, we must not squander what has been achieved. The RAE has created an enormous database which very few other countries have, with the possible exception of Australia, and this must be used in the future. Thirdly, the RAE, or whatever replaces it, should be redesigned as a productive resource that helps the scholarly community at large and also helps more practical people who want to make use of research.
	Quite a few universities have explored how this might be achieved. Southampton and Loughborough universities have been in the lead by suggesting that all refereed articles might be self-archived on the internet if the permissions problem can be resolved, and a system called DARE in the Netherlands will be set up along these lines. This might make everything available to the international community, as well as provide a monitoring system. Fourthly, it is crucial that whatever replaces the RAE should not be simply science-driven; I very much agree with the noble Lord, Lord Norton of Louth, about that. In science, there is a very close correlation of more than 0.9 per cent between citation indices and the RAE results in quite a few subjects. That is not the case in the arts or the social sciences. We must ensure that this is not just a science-driven enterprise, and it is a pity that it emerged in a document that is purely about science and technology. In my view, you can exaggerate the degree to which science and technology will dominate in a knowledge-based economy. You need creativity in the application of technology just as much as you do in the invention of technology. Fifthly, the new system could be oriented to universities overall, rather than to departments or individuals. In other words, it could be allocated by the Government in the same way in which it is organised in universities. That might give the so-called new universities in particular some incentive in the future.
	In conclusion, I would say, "RAE: RIP", and, if noble Lords want another exploration, the words "Really Appropriate End". But it will not be easy to replace. I remind noble Lords that the Roberts report looked in detail at so-called metrics. This is the report's conclusion:
	"we are now convinced that the only system which will enjoy both the confidence and the consent of the academic community is one based ultimately upon expert review".
	The RAE might be dead, but I do not believe there will be sweet consensus over what follows it.

Lord Dearing: My Lords, it was a great privilege to listen to the noble Lord, Lord Rees, making his maiden speech and I look forward to hearing from him on many occasions. I have a bare-faced cheek to speak on this subject in the presence of so many experts, when I have no specialist knowledge of it. But I was stirred by the statement of the Chancellor in his Budget that the Government are setting out plans for a radically simplified allocation of the research funding that goes direct to universities. I understand that a study group has been, or is being, set up to come forward with proposals of metrics by the end of May for consultation. There seems to be a sense of briskness, in response to the view of the noble Lord, Lord Norton of Louth, that we must resolve this quickly.
	At least two references have been made to the study led by Gareth Roberts in 2003. I want in particular to quote the words at the beginning of his conclusion:
	"Some of us believed at the outset of the process that there might be some scope for assessing research on the basis of performance indicators, thereby dispensing with the need for a complex and labour-intensive assessment process".
	He goes on to say:
	"Whilst we recognise that metrics may be useful in helping assessors to reach judgements on the value of research, we are now convinced that the only system",
	is as the noble Lord, Lord Giddens, said. His first recommendation is that,
	"any system of research assessment designed to identify the best research must be based on the judgment of experts, who may if they choose, employ performance indicators to inform their judgement".
	There was a review of this issue by the House of Commons Science and Technology Committee the following year. It chided the funding councils for not taking fuller notice of the Roberts recommendations and suggested a range of measures which could be used to replace the peer review process in some areas, such as the physical sciences. It wanted this studied but doubted it would have been in time for the 2008 review. How much more that must be true of whether it would be possible and wise to do so starting in 2006 rather than in 2004. My whole experience of education has included, time and time again, occasions when important issues have been grasped and decisions implemented before they have been fully validated. The Government would be wise to move with due care in any changes.
	Gareth Roberts, to whom I have referred, indicated in an article he wrote in 2005 that he was impressed with the progress that had been made in developing and refining metrics. He has thought in terms of metrics running in parallel as a contributor to the methodology. He has said, as others have said, that the RAE has achieved some of the purposes for which it was created in increasing the quality and volume of research work.
	But, even though the tide—clearly in the Chancellor's mind—is going the way of moving with care, the criticisms of the RAE that have been voiced today have been mainly to do with the extent to which it is the thief of valuable time and how a bureaucracy develops bureaucracy. The noble Lord, Lord Giddens, suggested that the direct costs of academics and whoever is engaged in the panels was £45 million. He mentioned a much greater opportunity cost but I shall just take the direct cost of £45 million, which is less than 1 per cent of the grants made under the RAE over a five or six-year period. For a system that allocates £6 billion or £7 billion, 1 per cent of the cost does not seem unduly expensive to me.
	It has been suggested in an article by Barham Bekhradnia, who is the head of the Higher Education Policy Institute, in today's Independent that the cost of the research councils per pound expended is very much higher. I have heard of a figure of four times as much; he quoted a figure of 10. Although I cannot validate those figures, it sheds some light on the fact that the RAE may be cost-effective in direct terms.
	I think that the time has come to recognise that metrics have a major role to play—but, from what I hear, they are not fit for purpose in relation to the humanities, the arts, probably the social sciences and the law. We would be departing from a homogenous system if we were to move partially to one rather than the other. This suggests to me not to rush it. They should run as part of and alongside the 2008 review, but any willingness on the part of the Government—whatever the universities may say—to change it in an instant would be a touch unwise.
	I have one personal concern, to which the noble Lord, Lord Giddens, referred at the end of his remarks. That is on the importance of applied research in the reckoning of things. The United Kingdom, as has been said, scores highly in the outstanding quality of its curiosity-driven research, and in its quantity. Yet when it comes to reaping the benefits through products and services, we have not distinguished ourselves in terms of applications.
	I have read—I think this was in the Lambert review—that the American federal government commit $19 billion a year to university research, of which $4.4 billion or a touch over 20 per cent, if I recall his figure, is for applied research. With their specialist institutes, the Germans are also very good in that area. I would hope that if the metrics can develop in that way they will give weighting to applied research; or, perhaps, the issue is to see the third leg as a separate stream. I do not know the answer and do not think that anyone here today can say what the answers are. It is easy for us to criticise what we have; it is not so easy to say what should come in its place.
	Finally, I notice that the Chancellor referred to a threefold increase in the nation's earnings from education. I was impressed; I hope he can do it. It is a touch difficult, so I hope that the Chancellor—having made that important statement—will give support to the British Council and the universities to enable them to achieve their share of that threefold increase.

Lord Desai: My Lords, it is a great pleasure and privilege to take part in this debate. Earlier, I spoke on the Rural Payments Agency and had to confess that I was not a farmer; I was speaking purely as an academic. But this is one field in which I can say—to paraphrase the Prime Minister—that I bear the scars of RAE on my back. I was on the panel for economics in the first RAE, and in the latest one; for seven years, I was chairman of the research committee for LSE and saw through submissions for two RAEs.
	On balance, I am more for it than against it. It is hard to explain to the taxpayer why we complain about the RAE. Academics are asked whether they have written four pieces of published, refereed work in four years. At one per year, it is not slavery. When RAE was first introduced I had many colleagues pregnant with great ideas which were not going to fructify in the prospect of the coming RAE, but would perhaps in the next. We would ask them, "What is this great earth-shaking thing that you are going to do that you cannot do anything else in the meantime?".
	As a social scientist—I was actually an economist, doing more quantitative social science than other social sciences, but I also sat on an interdisciplinary board in the last RAE—I found that as long as there is peer review, measurement is acceptable because it is done by people who know all the difficulties of that subject. If academics complain too much about being assessed by their peers, someone else will be assessing them and be less regarding of their complaints.
	So, while we want to preserve our academic freedoms and creative opportunities, we have a RAE-type of peer review system based on some kind of grading. If you cannot grade, you cannot compare; not everything that everyone does is a work of genius. After all, as academics we mark scripts day after day, year after year. We know where to draw the line between a 2:1 and a first, or a 2:1 and a 2:2, and where something is 58 rather than a 59. That is part of our life. If we cannot do that to ourselves when it comes to research, we are abdicating our responsibility. Of course things are difficult—of course there are unpopular approaches. There are people, not in the mainstream, who could be doing good work. But a peer review mechanism can patiently go through these publications. For at least two summers in 1989 and 2001 or 2002, I sat for a whole month doing nothing but read submissions to the economics panel. The last time it was a glorious summer. I sat in my Hastings house, looking at the sea, unable to go out, and I read close to 500 articles.
	People on panels put in very serious work. It is important to do that. It is not that the Government are necessarily very generous to academics, but I am grateful for what they give. The taxpayer will not forgive us if we are not accountable for the money we get. We have to show that we make good use of that money.
	The point of research assessment is that it is a search and reward for excellence. It is not a democratic, popular exercise, where all shall have prizes, as it says in Alice in Wonderland. It is not a game in which all can have prizes. It is a game in which some people are good and get the prizes while the rest just have to try harder next time, and if they do not get a prize, tough luck.
	I was very impressed when the history panel, either last time or the time before, graded Oxford Brookes University higher than Oxford. That shows that these peer groups are not impressed by age, name or élitism. It is an exercise by people who are active in research to look at their colleagues who are also active in research; it is not in their interest to downgrade people.
	Obviously there is some game playing. As soon as rules are established, clever people will begin to find a way around them, especially because the funding rules are not transparent in light of the results. People have to play all sorts of games. That is inevitable in any system in which some flexibility is allowed for people to submit. The number of academics who submit, the kind of grouping that is made or where which colleague is placed are all matters of game playing, but that is not a bad thing.
	I want to say one more thing about different disciplines. It probably makes sense to say that the arts and humanities review board should look after arts and humanities. It probably has a different kind of research culture from natural sciences; it is certainly different from social sciences. Perhaps natural sciences, mathematics and social sciences and the arts should be dealt with under three different systems. That may lead to the problem of interdisciplinarity that the noble Lord, Lord Rees, referred to in his excellent maiden speech. But that is a small problem—it can be handled. It is important, however, to allow for different research areas having a different research culture.
	In conclusion, life is tough. If you want to be the best, you have to work hard at it. There is absolutely no reason why any consideration should be shown; if we are searching for the best people, they have to show that they are the best.

Lord Sutherland of Houndwood: My Lords, I thank the noble Lord, Lord Williams of Elvel, for initiating this debate. It is timely for all the reasons that have been given. I also congratulate my colleague, the noble Lord, Lord Rees of Ludlow, on an excellent maiden speech. He probes the farthest corners of the universe in his research and doubtless some of that light will shine in this place for years to come. We look forward to that.
	I recall the story of a series of Civil Service interviews, at the end of which the successful candidate was summoned and told that he had got the job—it was a very senior position. Just as he was leaving, he said, "Well, is there any advice you can give me?". The advice was: "You are evil, but you are necessary". That is the view that many of us took of the RAE when it was first set in place in the late 1980s. It has probably grown increasingly evil in the eyes of most. The question today is whether it is still necessary.
	Let us consider the situation in the late 1980s. I joined what was then called the Committee of Vice-Chancellors and Principals sometime in 1985. It had 55 members, which represented the total number of institutions at university level which were funded to do research. There are now three times that number of institutions in membership of the equivalent body, all of which might reasonably claim that they want to be funded for research. That poses the first question: affordability. Can we afford the system that we had, whereby you expected a certain volume of cash for research because you were a university of a certain size? It was seen very clearly by those who were responsible for the system that that was unlikely to continue.
	At that time, about 14 per cent of the age cohort went into higher education; the aspiration is now 50 per cent. That is a good aspiration, but it raises questions about the affordability of a system which allocates money for research partly on a per capita basis, as it used to do. I said "per capita basis". In fact, in the pre-RAE days, research money was given in a way that was not transparent; it was given in a way that was based on history—how much you had received previously; it was probably based on informed prejudice. The system's lack of transparency probably suited the vice-chancellors because the money came in a large black sack and could be spent in the institution according to the predilections of the vice-chancellors and/or their governing bodies. That system could not continue, especially with the cost of research going up. The costs of what we call "big science", engineering and medical research have been rising dramatically because of their nature.
	That is the background to the debate. We have already heard recounted today the various ways in which the system has begun to crack, twist and turn. People do play games, and all the faults which have been attributed to it are real. However, certain difficulties are worth highlighting. The system offers returns which diminish in relation to the amount effort you put into your application for funds. The amount that moves incrementally from one research assessment exercise to another has gone down. Therefore, if you hope to raise dramatically the flow of cash coming into your institution, it is almost, if not actually, impossible. In the same way, large sums of money do not move down the system in amounts which are sufficient to create significant new centres. The amount of money moving around has diminished despite the fact that the costs of operating the system have gone up.
	While I endorse the points that have been made by others, I mention two other difficulties which have not been mentioned so far. The humanities face a very real problem—I shall come back to that briefly. A significant problem also faces single-subject or single-field institutions. I give the example of the Institute of Education in the University of London, which is highly regarded throughout the world. In the first RAE exercise, that institution scored the highest possible score: five. It could do no better. In the next exercise, it scored five once again, but the fund reduced for the obvious reason that the pot for education had not increased sufficiently to cover the rise in quality of research and RAE applications that came into the system. Therefore, there was no way in which it could enhance its grant or even maintain the level at which it was operating. That is a particular problem for single-field institutions, of which there are quite a number. For larger institutions, in which it was my happy position to work, we could move money around between departments, faculties and subjects; there was still a degree of flexibility. But for single institutions, the money comes per capita for teaching and at that stage there is an element for research that can go down without one's grade diminishing.
	I declare an interest. I am on the governing body of the Courtauld Institute of Art. I fear that it might find itself in a similar position, because however well one does, if one is a small institution with a single subject, that sets parameters for the outcome that one can hope for. We have been challenged, and rightly so, but it is not enough to show what the problems are. What are the ways in which we might go forward? I have my own few suggestions to add to those that I hope are taken into account. First, I stress that the evaluation and targeting of resource is still essential. It is necessary to have a mechanism for doing that. Secondly, judgments are required across the whole system and across all faculty areas. Metrics numbers are important, and I have no doubt that they will play an increasingly important part in the sciences and in engineering. For the humanities they are not equally effective but they are not irrelevant. The fact that someone reads one's papers is not irrelevant to their quality. It is not the sole criterion, but it is important. Metrics have their place. Judgment should be taken into account, but on the other hand should not be deduced simply from a single set of measures or numbers, because I have no doubt that they will be flawed.
	Thirdly, the noble Lord, Lord Giddens, has already pointed out that a huge volume of information has been built up. We know a great deal about the research capacity of our system of universities. That has been accumulated over nearly 20 years. My suggestion is that we should take that into account in making future allocations for research. That is not shooting in the dark. It is known which institutions have a long and continuing capacity to produce high quality research.
	I should like to suggest that a future research assessment exercise should move away from the single up to the larger grouping: faculties, institutes and universities. It is known which universities, institutes and faculties are constantly producing high quality research—there is a track record. Yes, they can go wrong—I will return to that point in a moment—but the amount of effort taken to come to a decision on such matters compared with the amount of money that moves in the system is disproportionate. I suggest that grants for research are made to institutions over whatever length, whether it is five, seven or 10 years, but that they are subject to review at institutional and faculty level as appropriate. This is a system that the MRC and the Wellcome Trust operate extremely well. If after five years one is not producing the goods, there will be a change in one's financial research circumstances, but there is not constant looking and shoulder leaning.
	Finally, if the funds are allocated in that way, it allows the possibility of institutions making judgments and backing winners that have not been picked up by the standard peer review process. The system is necessary, but has to change.

Baroness Sharp of Guildford: My Lords, I join others in thanking the noble Lord, Lord Williams of Elvel, for promoting what has proved an extremely timely debate. It is a great pleasure to have someone as knowledgeable as the noble Lord, Lord Rees of Ludlow, deliver his maiden speech in this debate. I look forward to his participation in many further debates.
	I declare an interest: as an academic my own writings were subject to the RAE in 1989, 1992, 1996 and 2001. Indeed, the writings were in the very institution that introduced to this country the dreaded word "bibliometrics". The first sort of metrics, which were used in 1989 and were about citation indices, derived from my own institution. The 1989 exercise was very much a pilot to see how far some sort of metrics might work. It was as a result of that exercise that it was decided that you needed to have something that reflected the texture of research a little better, so we moved to the panel system, in which metrics played a part but the panels were also able to judge something of the quality.
	From 1992 onwards the exercises have got more and more complicated, as the noble Lord, Lord Williams, suggested. Their complication increased almost geometrically. In 2001, there were 68 subject areas, with panels, and something between 10 and 20 members on each panel. As the noble Lord, Lord Desai, mentioned, if each member of the panel, who were largely better known and better qualified researchers, had to read something in the region of 500 pieces, articles and books that had been submitted, it was a huge exercise that occupied a good six months of their year.
	We have to look at the costs of the exercise. The direct costs of the 2001 exercise were estimated by PricewaterhouseCoopers at £5.6 million, but the indirect costs were in the time occupied by the academics, and not only the panel members but—in every university and every department—the time taken to prepare the submissions. A cost of £45 million has been put on this, but it could be considerably greater than that, partly because it has become such a central piece of the landscape for every department that they are running dummy runs. I know a lot of departments that are currently running those dummy runs.
	As has been made clear, the up side of the exercise has been to stimulate research in the UK. In numbers of people involved and in terms of publications, about 5 per cent of the research production in the world comes from the United Kingdom, but we have moved up from 1989 from 8 per cent of citations around the world to 12 per cent—and 13 per cent of the highly cited papers. It has already been noted that, in 1996, 36 per cent of research-active staff were in departments rated either five or five-star, and the two top-rated departments by 2001 had moved up to 55 per cent. We seem to get grade inflation here as much as we get it in A-level.
	The down side is the cost of the administrative burden placed on departments and the distortion of research output. That was a point made by the noble Lord, Lord Rees. It is one that we must beware of. In science, almost by its nature, you investigate and set up experiments because you do not know what the outcome will be—and you will get dud results. But if you get dud results, you cannot write them up, so you go for the safe projects that you know will yield a certain result. That is a great danger.
	Also, there is a bias against multi-disciplinary research in favour of theoretical and against applied research—against books as distinct from journal articles and, above all, against edited books and collections of essays. We know that academics play the game; they are not unintelligent so, inevitably, if you offer them a reward in certain circumstances, they will go towards that reward. Then there is what I call the league-table phenomenon of the star academics who are bought up. Finally, there has been a distortion in teaching. Some of the best researchers are devoting very little of their time to teaching because their institution puts such pressure on them to devote themselves to research.
	As we all recall, there have been reviews on this subject; in particular, the Roberts review. HEFCE produced a report after that review, and I found myself quite amused that the first item that came out of it was the overwhelming support from the universities for an assessment process built around expert review conducted by discipline-based panels. There was also support for proposals that the panels should be helped to make better use of quantitative indicators relevant to their discipline.
	In other words—and I think this comes out in the UUK briefing we had for this debate—there is a great conservatism on the part of universities. They do not necessarily want to move away from the system they know. Better the devil you know than one that you do not. The 2008 RAE is already well under way. The Select Committee report, which came out in 2004, was tougher on this issue and called for a more radical review. From these Benches we have some sympathy for that. We consider the funding bodies to be unjustifiably conservative in their proposals. We do not think HEFCE's role is to protect the sensitivities of universities.
	For the first time in my life, therefore, I am saying three cheers for Her Majesty's Treasury. It seems to have cut through some of the fog that has surrounded this issue, the ifs and the buts, and put forward pretty decisive plans that effectively will get rid of the RAE in its present form and replace it with a simpler allocation system after 2008. So far we have had only an outline of what it is proposing, but it would be to harness the QR allocations, at least for science departments, Research Council income, plus—this is an important plus, and picks up some of the points that have been raised—the full range of research income from charities, industry, other government departments and the EU.
	My own feeling is that this is a thoroughly welcome initiative. I understand that in the social sciences, the humanities and mathematics, it may not be a satisfactory metric. Quite clearly, there has to be an extensive consultation here. I shall finish by echoing the words of the noble Lord, Lord Giddens: the RAE may be dead, but I think there will be no consensus about what follows.

Baroness Buscombe: My Lords, I too am grateful to the noble Lord, Lord Williams of Elvel, for asking this important Question. I also welcome the noble Lord, Lord Rees of Ludlow, to your Lordships' House, and congratulate him on his maiden speech. Once again we are reminded of the extraordinary breadth and depth of skills and expertise that we enjoy in this House, and we look forward to many more contributions from him.
	The noble Lord, Lord Williams, asks if the research assessment exercise is satisfactory at present. I wonder if his question is in the right tense. That is a question I will come to, but we must also ask whether the provisions for the future that are being made as we speak will be sufficient and effective, or merely another burden on universities, which are already struggling to survive in an ever demanding market.
	As things stand, the dynamic is counterproductive. The demands to display research achievements invariably lessen the time spent on teaching. Academics must find a healthy balance between conducting good-quality research and teaching. Here I am talking about the complementarity between research and teaching. I say to the noble Lord, Lord Desai, that I think the taxpayer wants to know about that. The best university teachers are likely to be conducting research they can bring to tutorials and thus encourage a lively, inspirational exchange of ideas. Any assessment of research must surely be done with this in mind.
	The research assessment exercise can act as a demoralising force for academics. As my noble friend Lord Norton of Louth pointed out, this is a burden. The time and effort spent in preparing for this exercise takes away from valuable research time. Those undertaking research must have the necessary freedom from bureaucracy to embark on original and innovative work. Funding streams must facilitate this, rather than hinder it. Noble Lords raised their concerns about the RAE in terms of the bureaucratic burden in the debate of the noble Lord, Lord Norton of Louth, on university bureaucracy in your Lordships' House last November. During that debate, the Minister indicated that there was a challenge to improve accountability, with a light-touch approach. How does the Minister see this developing in terms of the RAE for 2008? We must ensure that research is not driven by the process of assessment, where universities must second-guess criteria to secure funding.
	We welcome the fact that the RAE, in its current form, is going. However, what plans are the DfES considering for a replacement funding system? How will the new system be an improvement on the present RAE? The Chancellor, in the other place, stated in last week's Budget speech that the RAE system would be based on metrics, something noble Lords have spoken about at some length this evening. We on these Benches believe metrics to be a misleading and inadequate means of measuring research achievements in the arts. We have concerns about the progression of metrics, with particular regard to the arts, humanities and social sciences. Will the Minister's department take this into consideration, so the future system will apply to all disciplines equally? Many of the problems that apply to funding on a formulaic basis are also likely to apply if metrics are used to allocate research funding. The RAE is already seen to discourage blue-sky or practice-based research. There is a traditional focus in government on science, technology and engineering as key drivers for business. We must ensure that all sectors are recognised by the RAE, whatever approach is taken for future allocation.
	There is widespread discontent with the RAE and it is time for fresh thinking. Whatever system is put in place must encourage genuine research, and not just reward form-filling and ticking boxes. The proposals have come in advance of 2008 for a reason. I look forward to a full debate on this and other issues related to this subject in a few weeks' time in the debate of the noble Lord, Lord Patten, on the role of universities in promoting research and development. I flag that up to noble Lords this evening, in the hope that they will notice that, soon after we return from Recess, we will have that debate on 27 April. We have time to rectify what is, potentially, a damaging system of assessment that could see arts and humanities research assessment severely compromised or sidelined. Indeed, I note what the noble Lord, Lord Dearing, said about the system of metrics not being fit for purpose in respect of the arts, humanities and law.
	I wish to close by repeating some of the points made by my noble friend Lord Norton of Louth. In so doing, I suggest that the Minister take away much of what has been said in tonight's debate—a very important contribution, I believe, to the consultative process for the future. Given the need for greater certainty in the system, academics need to know what is happening to RAE and the current thinking about an alternative system. What is wanted, we understand, is a clear and effective light-touch regime. If there is no consensus, as the noble Lord, Lord Giddens, suggests, perhaps that will be difficult; but if there were consensus on change, would the Government consider an earlier move to another system? If so, would that be wise? As the noble Lord, Lord Dearing, said, we need to move with care because—as the noble Lord, Lord Rees, quite rightly said—we must get it right.

Lord Adonis: My Lords, the House is indebted to my noble friend Lord Williams for raising this important subject. It is a particular pleasure to begin by congratulating the Astronomer Royal, the noble Lord, Lord Rees of Ludlow, on his excellent and authoritative maiden speech. I am told that one of his main current research interests—when he has time off from being Master of Trinity College, Cambridge—is cosmic structure formation, especially the early generations of galaxies formed at the end of the cosmic dark age. That sounds to me like an excellent basis for understanding the genesis of the research assessment exercise and the metrics system that might replace it.
	I am glad to say that Britain's universities are in anything but a dark age, cosmic or otherwise. In fact, our universities have never been more internationally respected and successful. A good part of the reason for that, as the noble Baroness, Lady Sharp, made clear, is their immense research strengths, as demonstrated and encouraged by the research assessment exercise.
	Since 1986, the RAE has demonstrated conclusively that most taxpayer-funded research is truly world-class and in terms of quality stands second only to that produced by the vastly larger higher education system of the United States. All speakers in the debate have recognised the importance of the RAE in driving up standards, even if it has deprived my noble friend Lord Desai of a good part of his summer holidays. Successive reputable international studies have also demonstrated this, most recently those conducted in China, by Shanghai Jiao Tong University and in Spain by Webometrics.
	On that basis, I enter my noble friend Lord Gidden's quiz with the boring, but I think essentially accurate, entry that RAE stands for "realising academic excellence". Between the last two RAEs, in 1996 and 2001, the number of university departments achieving the top five or five-star ratings rose by 65 per cent to over 800. Those excellent departments now employ more than half of the researchers in the higher education system. The London School of Economics is particularly well represented in today's debate, as it always is on university matters in your Lordships' House. My noble friends Lord Williams, Lord Desai and Lord Giddens have all played an important part in its recent history, so I am glad to note that the number of five-star departments at the LSE rose from four in 1996 to seven in 2001, but many other universities have a good story to tell as well.
	Noble Lords have noted in the debate that the RAE has changed and improved every time that it has been conducted. For the next exercise in 2008, the financial cliff edges—the difference between, say, a ranking of four and a ranking of five, which my noble friend Lord Williams mentioned—will be modified by the introduction of institutional quality profiles of the sort recommended in Sir Gareth Roberts's 2003 review. There will also be fewer peer review panels in 2008 than there were in 2001 and greater recognition of previously undervalued activities, notably applied research. As the noble Lord, Lord Dearing, rightly emphasised, there are strong arguments in favour of a separate funding stream for applied research, and that is why the Government established the Higher Education Innovation Fund. I can assure the noble Lord that the Government will be exploring this important issue further in the forthcoming Comprehensive Spending Review.
	My noble friend Lord Williams suggested that the RAE had penalised laboratory-based subjects. We do not believe that to be the case. The formula according to which the funding bodies allocate money has always been heavily weighted in favour of the hard sciences, in recognition of the higher cost of those subjects. However, the Government are in no way complacent about the RAE. My noble friend Lord Williams is the distinguished biographer of the most famous French president of the last century, Charles de Gaulle. I hope that he will permit me to answer his question—is the operation of the RAE satisfactory?—by quoting another French president, Valery Giscard-d'Estaing and using his famous formula, "Yes, but". Yes, the RAE has been a broad success, but there are issues about its future that it is right to discuss and to address.
	The first is the cost. The Higher Education Funding Council for England (HEFCE) estimates the total cost of the RAE at more than £50 million, but on other estimates it could be higher still, as the noble Baroness, Lady Sharp, and the noble Lord, Lord Dearing, said. In context, £50 million is less than 1 per cent of the total value of the research budget whose allocation the RAE informs, but £50 million is £50 million, and most of that cost is borne by universities in staff and administrative time rather than by HEFCE. It is absolutely legitimate that we see how we can reduce that sum.
	The second issue is bureaucracy, about which the noble Lord, Lord Williams, made much in his remarks. We need to be clear about what we mean by bureaucracy. The quality of the assessment exercise itself in the RAE is almost universally acknowledged. As Sir Gareth Roberts put it:
	"The confidence and the consent of the academic community is one based ultimately upon expert peer review".
	Peer review is at the heart of the RAE. However, it cannot be denied that the RAE involves a lot of what I might term academic bureaucracy. It involves 82 peer review panels, supported by 800 pages of guidance and many times more than that in university submissions. This again is an issue for legitimate consideration with regard to the future of the RAE, although as the noble Lord, Lord Dearing, rightly mentions, the cost of administering research council grants is also significant. That needs to be taken into account.
	A third issue often raised is that the RAE is divisive. The Government have much less sympathy with that view. As my noble friend Lord Desai said, research selectivity must, of necessity, be selective and tough. If it were not selective, we would not be fostering and rewarding excellence. I believe that all noble Lords would agree that that should be our objective in allocating most research funding.
	Research excellence is emphatically not the only game in town to enable universities to develop their mission. Many universities have successfully developed or, as the noble Lord, Lord Sutherland, said, always had from the outset alternative missions and alternative sources of funding, whether through promoting access, through excellence in teaching or, increasingly, through interaction with business and the community. That is as it should be, as we foster a diverse education system that meets the full range of social, economic and academic demands to which higher education can legitimately respond.
	The research funding whose distribution the RAE informs is allocated entirely at the discretion of the universities that receive it. Universities are as free to spend quality-related research funding on a department that has performed badly in the RAE or on an entirely new form of activity as on one that has performed well. They make their own strategic decisions. However, I would mention one further benefit of the RAE. The RAE has been useful not only in distinguishing between universities but also within universities, helping faculty and university leaders to distinguish productive from unproductive researchers and to distinguish research-intensive from research-inactive departments. That information has been an important management tool for vice-chancellors, whose management decisions and strategic planning now usually take research quality into account. In my experience, vice-chancellors do not trumpet from the rooftops that particular benefit to them of the RAE, but they are generally happy to acknowledge it in private, including to Ministers, I might add.
	Can I address briefly the issue of "game-playing" that my noble friend Lord Williams raised? I do not believe it to be a phenomenon that began with the RAE. It will certainly not end with it. Leading research universities have always sought to attract the best researchers, and comparatively few academics have remained in one institution for their entire career. Likewise, universities have also always sought talent from overseas. Wittgenstein and many others were not recruited by Cambridge in the 1930s because of the RAE, but because Cambridge, then as now, wanted the brightest and the best.
	We are weighing the strengths and weaknesses of the RAE. Like the universities themselves, we worry about the bureaucracy of the RAE and wonder whether a simpler system is possible. The challenge is to achieve that while upholding the principle of the dual support system for research, with some funding for specific projects coming through the research councils and the rest coming from the funding councils to encourage and reward overall excellent research performance.
	As noble Lords have noted, last week my right honourable friend the Chancellor announced the imminent launch of consultation on a metrics-based research assessment system to be tested in parallel with the 2008 RAE. Our expectation in doing so is that, after the RAE, the system for assessing research quality and allocating quality-related funding will be mainly metrics-based. My right honourable friend also set out the broad parameters of what a metrics system might look like. That is an important step forward in realising a commitment to explore metrics first given in the 2004 science and innovation investment framework.
	Metrics are what most of us would simply call "statistics", such as research income, numbers of researchers, volume of publications, citations and so forth. The potential merits of this approach are transparency and reduced bureaucracy, avoiding the need to bring together panels of academics—at least, on anything like the scale that we do at the moment. The noble Lord, Lord Dearing, rightly cautioned us to be very careful before we leap in this respect. No one has more experience than the noble Lord in preparing the ground for substantial public policy shifts, and he speaks with great wisdom in these matters.
	I should emphasise that our consultation proposals for the metrics system are being drawn up carefully by a group led by Sir Alan Wilson, the director-general for higher education in my department, in conjunction with Professor David Eastwood, the chief executive-designate of HEFCE. The Higher Education Funding Council for Wales and its counterparts in Scotland and Northern Ireland are collaborating closely. A particularly important issue for the review to consider is how the arts, humanities and social sciences will be catered for in a new system.
	In view of the front page of today's Times Higher Education Supplement, I should also stress that the Treasury will be represented on the working group. My department has been working closely with both the Treasury and the Office of Science and Technology ever since our joint commitment to shadow RAE 2008 with a metrics exercise was first made in 2004.
	Questions have been raised about the likely distributional consequences of a metrics-based system as against the status quo. I can assure the House that we will model this carefully once we have a firm metrics proposal from the working group, and the data will be published. Full consultation proposals will be published in May and final decisions will be announced before the end of the year.
	Our objective in setting out proposals for the future will be simple: to continue to further the research excellence and dynamism that the RAE has encouraged over the past two decades. However, as we made clear in the Budget documentation, and I reiterate today, a new metrics-based system will replace, as opposed to succeed, the 2008 RAE only if there is a broad consensus for that in the consultation process which is about to begin.
	In conclusion, the Government are aware both of the benefits of the RAE and of its shortcomings. In seeking to develop a new system, we are conscious of the imperative to act with the confidence of our universities. As we do so, we will reinforce Britain's international research pre-eminence and, I believe, give universities greater freedom to meet the challenges of international competition.

House adjourned at twenty-two minutes past six o'clock.
	Thursday, 30 March 2006.